June 2010At this point, it appears the ARRA COBRA subsidy has been allowed to sunset. The latest extension was delayed in Congress and ultimately voted down.
How does this affect your company?
Employers must continue to offer COBRA to terminated employees, however terminated employees are no longer eligible for any financial reimbursements from the federal government.
As soon as the Department of Labor releases an up-to-date COBRA notice (which does not contain information about the ARRA subsidy) we will make it available on our web site. In the interim, you may continue to use the notice you currently have, just be sure to note that the subsidy end date was May 31, 2010 and that the person you are sending the documents to are not eligible for the subsidy due to the program sunsetting.
Please note that there is talk of reinstating the ARRA COBRA subsidy with a 6 month subsidy period, rather than the 15 month subsidy period. AKT Benefit Advisors will keep you informed on whether this bill makes its way through Congress and into law. At this point, employees terminated on or after June 1, 2010 are no longer eligible for a subsidy.
How does this affect those currently receiving the subsidy?
Former employees currently receiving the subsidy will continue to receive it for their entire 15 months. Companies may continue to write-off the 65% that the federal government pays towards the premiums on their form 941.
Click this link to view more on the ARRA debate in Congress: Healthwatch
April 2010The American Recovery and Reinvestment Act of 2009 (ARRA) provided a temporary subsidy for the cost of COBRA continuation health coverage. The COBRA premium subsidy has already been extended twice, first in December 2009 and then in March 2010. On April 15, 2010, President Obama signed The Continuing Extension Act of 2010, extending the eligibility period for the subsidy again.
Please read below for more information and contact AKT Benefit Advisors with any questions.
Eligibility Period Extended Through May 31, 2010
Before the most recent extension, an employee had to be involuntarily terminated from employment between September 1, 2008 and March 31, 2010 to be eligible for the COBRA premium subsidy. This eligibility period has been extended so that individuals experiencing an involuntary termination of employment through May 31, 2010 are now eligible for the 65 percent subsidy of COBRA benefits.
Although the extension was not passed until April 15, 2010, it is effective as if it were part of the original law. This means that individuals who were involuntarily terminated between April 1 and April 15, 2010 are eligible for the extension.
Extension of Subsidy Eligibility for Reduction in Hours Followed by Involuntary Termination
In general, to qualify for the COBRA premium subsidy, individuals must experience a COBRA qualifying event that is the involuntary termination of a covered employee's employment, during the period beginning September 1, 2008 and ending May 31, 2010. As extended by the Continuing Extension Act, an involuntary termination of employment that occurs on or after March 2, 2010, and follows a qualifying event that was a reduction in hours that occurred from September 1, 2008 through May 31, 2010, is also a qualifying event for purposes of the premium subsidy.
If an individual did not elect COBRA after the reduction in hours of employment (or elected and later discontinued it), he or she will have another opportunity to elect based on the involuntary termination of employment if it occurred on or after March 2, 2010. However, the length of the COBRA coverage period will be determined as though the qualifying event were the reduction of hours of employment.
The notice requirements related to the COBRA premium subsidy continue to apply. Updated model notices will be available from the Department of Labor. (As of the moment this was updated, DOL notices had not been changed to reflect this extension.) If any individuals declined COBRA coverage due to the lapse of the premium subsidy between April 1, 2010 and April 15, 2010, they must be provided a new notice regarding the extension and be allowed to enroll.
Click here to view the most recent DOL Model Cobra notices:http://www.dol.gov/ebsa/COBRAmodelnotice.html
March 2010A new federal act, HR 4691 now extends the eligibility period for the American Recovery and Reinvestment Act premium subsidy for an additional 31 days (through March 31, 2010) and clarifies eligibility for the subsidy resulting from an involuntary termination of employment that follows a period of reduction in hours of work that caused an individual to lose health benefits under a group health benefit plan. These temporary rules make the same changes to the state continuation program allowing Oregonians enrolled in the state continuation plans to receive the maximum subsidy provided by the federal law.
The DOL provides in-depth information regarding COBRA/ARRA, including free training webcasts:http://www.dol.gov/ebsa/COBRA.html
December 2009On December 21, 2009, President Obama signed HR 3326 to extend the 65% subsidy for COBRA coverage that was originally provided by the American Recovery and Reinvestment Act of 2009.
Updated Information and Notices:Highlights of the extension are:
The eligibility period for the subsidy has been extended by 2 months; the subsidy is now available for employees who are involuntarily terminated on or before February 28, 2010 (instead of the original date of December 31, 2009).
The COBRA premium subsidy period is extended from 9 to 15 months from the date of the original qualifying event.
Example: Employees who started receiving the subsidy on March 1, 2009 may continue to receive it through May, 2010 (15 months from March 1, 2009)
Notice of Extension
The employer must provide a notice explaining the subsidy extension to:
any individual eligible for the subsidy on or after October 31, 2009;
any individual who loses group health coverage due to an involuntary termination of employment on or after October 31, 2009 through February 28, 2010;
any individual who is eligible for the subsidy under the extension but who ceased coverage on or after October 31, 2009 due to exhaustion of the prior 9-month subsidy period; and
- any individual who is eligible for the subsidy under the extension and who continued coverage on or after October 31, 2009 by paying more than 35% of the COBRA premium.
The notice must be provided by February 17, 2010 for individuals eligible for the COBRA subsidy on or after October 31, 2009 or anyone who is involuntarily terminated from employment on or after that date. For individuals whose 9-month subsidy has been exhausted, the notice must be provided within 60 days of the date it was exhausted.
Retroactive Reinstatement of COBRA
Individuals who ceased their COBRA coverage due to exhaustion of their 9-month subsidy may elect to reinstate their coverage without a break in coverage. These individuals must be given a notice of the extension and must pay their premium for the reinstated coverage by February 17, 2010 or within 30 days from receipt of the extension notice, whichever is later.
Premium Refund or Credit
The group health plan must also provide a notice explaining the subsidy extension to individuals who exhausted their 9-month subsidy and who have continued their COBRA coverage by paying a premium greater than 35% of the COBRA premium. These individuals are entitled to a refund or a credit toward future COBRA premiums for their overpayment of the COBRA premium.
All other ARRA subsidy rules still apply, such as that the individual must lose coverage due to an involuntary termination of employment for other than gross misconduct and that the individual may not be eligible for other health coverage or Medicare.
Oregon: State Continuation ChangesOn December 22, 2010, the Oregon Insurance Division adopted a temporary rule extending the Oregon health coverage continuation requirements to correspond with the federal law. This extends the eligibility period for the ARRA premium reduction for an additional two months (through February 28, 2010) and the maximum period for receiving the subsidy for an additional six months (from nine to 15 months).
Changes due to The American Recovery and Reinvestment Act of 2009 (ARRA)
Department of Labor Information The DOL has posted the following COBRA expansion updates to its website at www.dol.gov/COBRA
Model notices may be accessed at http://www.dol.gov/ebsa/COBRAmodelnotice.html
FAQs for Employers on the COBRA Premium Reduction may be accessed at http://www.dol.gov/ebsa/faqs/faq-cobra-premiumreductionER.html
Expanded FAQs for Workers and their Families on the COBRA Premium Reduction may be accessed at http://www.dol.gov/ebsa/faqs/faq-cobra-premiumreductionEE.html
Updated FAQs for Workers and their Families on General COBRA Provisions which may be accessed athttp://www.dol.gov/ebsa/faqs/faq_consumer_cobra.html
Click this link to view the DOL Employee Benefits Security Administration article with links to the optional job loss posters and COBRA flyers as well as links to free webcasts
and seminar registration
Oregon Insurance Division
Click this link to view the Oregon Insurance Division list of frequently asked questions regarding the COBRA subsidy:
Click this link to visit the IRS website to view information regarding the revised Form 941
and a FAQ
The revised 941 form must be used when reporting payroll taxes for 2nd quarter (April 30, 2009). Please note, you can not claim the credit for the 65% subsidy if you have not yet received the 35% payment the COBRA participant owes. Violations will be treated as an underpayment of payroll taxes and subject to applicable fines