It is also important to note that while full time employees who have their hours reduced to part time status, may still be able to participate in the medical insurance, they also most likely have a higher cost share of the premium. So, this would give further economic hardship to the employee who lost their full time hours and now has to pay more for their medical insurance (i.e. more than what they were contributing as a full time employee). Depending on the cost share of the premium, they may not have much, if any, income left after the insurance benefit costs are deducted from their paycheck.

Be Careful What You Wish For - Latest IRS COBRA Guidance Has Some Surprises for Employers

The IRS Notice 2009-27 has a lengthy Q & A section defining “Involuntary Termination” under COBRA-ARRA.  The link below should get you to the pdf version of the notice.

http://www.irs.gov/pub/irs-drop/n-09-27.pdf

The query posed in the original post in this thread appears to be answered in the IRS document that the above posters so graciously linked for us, on pages 5-6 of the PDF:

“Involuntary termination is the involuntary termination of employment, not the involuntary termination of health coverage…If the reduction in hours is not a reduction to zero, the mere reduction in hours is not an involuntary termination.  However, an employee’s voluntary termination in response to another employer-imposed reduction in hours may be an involuntary termination of the reduction in hours is a material negative change in the employment relationship for the employee.”

Thus, a reduction in hours is not a qualifying event for the purposes of the subsidy, unless the employee actually quits as a result of the reduction in hours.  Any such employees, even if they voluntarily terminated their employment, would be eligible for the subsidy.

Jonathan F. Cohen, Esq.
APRUZZESE, McDERMOTT,
MASTRO & MURPHY,P.C.
Somerset Hills Corporate Center
25 Independence Boulevard
P.O. Box 112
Liberty Corner, NJ 07938
Tele: (908) 580-1776
Fax: (908) 647-1492
email:  .(JavaScript must be enabled to view this email address)

COBRA Update: IRS Issues Guidance Regarding Administration of the COBRA Subsidy