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COBRA Subsidy Is Extended

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Eligibility for the 65% COBRA subsidy was to have expired at the end of 2009.  The Department of Defense Appropriation Act of 2010 (P.L. 111-118) extends the duration of the subsidy to 15 months, from nine months, and extends the eligibility period to employees laid off as of February 28, 2010.  The law also makes other changes to the COBRA subsidy.

Transition Rules And Notification Duties 

The law provides transition rules for assistance-eligible individuals who have exhausted their subsidized COBRA benefits.  Under these rules, individuals who have paid the full COBRA premium must be refunded the difference or have the difference credited to their accounts.  In addition, individuals who let their COBRA coverage lapse may make retroactive payments at the subsidized rate.  Payment is due by is the later of February 17, 2010, or 30 days after notice of the extension of the subsidy is provided.


Assistance-eligible individuals who have exhausted their subsidized COBRA benefits and who failed to pay the full COBRA premium, or those who paid the full premium, must be provided with a notice of these extensions.  Notice must be provided within 60 days of the date their subsidy ended.  The notice must include information on making retroactive payments and reimbursements or credits.


Group health plan administrators (or other entities that were originally required to provide notice of the COBRA subsidy) must provide notice of these extensions to individuals who were assistance-eligible individuals on or after October 31, 2009.  Notice must also be provided to employees who experience a COBRA qualifying event (i.e., a voluntary or involuntary termination of employment) after October 31, 2009.  Notice must be provided by February 17, 2010.  For employees who become eligible for the subsidy after December 19, 2009, the regular COBRA subsidy notification rules apply.  The Department of Labor will revise subsidy-related notices.


Originally, employees had to be involuntarily terminated and eligible for COBRA by the eligibility cut-off date to receive the subsidy.  The law clarifies that employees only need to be involuntarily terminated by February 28, 2010, to be eligible for the subsidy.  Impact: Employers could pick up a portion of employees' COBRA premiums without employees losing eligibility for the full 15 months of subsidized premiums.

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