COBRA Subsidy (American Recovery & Reinvestment Act of 2009- ARRA)
Many of you have heard pieces of information regarding the COBRA Subsidy Act that President Obama signed on February 17, 2009, which had an effective date of March 1, 2009. The ARRA reduces COBRA premium for eligible participants by 65% for up to nine (9) months. Any person that was involuntary terminated (AND was on your health plan) prior to being terminated as of September 1, 2008 through current, are eligible for this provision.
The DOL just came out with an updated Qualifying Event Notice that includes the new provisions for the ARRA. Employers must notify ALL terminated employees of this new COBRA regulation if they had a termination date of September 1, 2008 or after; whether or not they took COBRA initially. This new law is a brand new qualifying event for someone who didn't elect COBRA initially or stopped making payments. The new election period begins 3/1/09 and they have 60-days to elect from the date of the notice. Their COBRA will not go back to the originally cancellation date for coverage, it will begin as of 3/1. Also, coverage will not extend beyond the 18-months based upon the original COBRA eligibility date.
Below is a sample notice that must be sent to individuals who were on your health plan prior to their termination. This notice MUST go to ALL terminated employees whether or not that termination was voluntary or involuntary. The notice has a worksheet for that terminated employee to complete to assist them in determining whether or not they are eligible for the Stimulus Package.
The employer will pay 65% of the COBRA payment. (The 65% includes the 2% administration fee.) The Qualified Beneficiary pays 35%. The amount the employer pays towards the COBRA premium will be reimbursed by claiming the amount as a credit on Form 941. An employer can obtain additional information from their Tax Accountant.
The employer will be responsible to pay the 65% portion until one of the following occurs:
- 9 months after the first day of the first month of coverage period
- The date following the expiration of the maximum coverage period
- The date following expiration of the period of coverage that would have been required if COBRA had been elected
- Eligibility for coverage under another Group Health Plan or Medicare unless the coverage is only for dental and vision services
- Does not require election as a reason for premium assistance termination, only eligibility
- Eligibility also includes eligibility to enroll in spouse's Group Health Plan
(If over age 65 at the time of the Qualifying Event, subsidy will not be offered due to Medicare eligibility)
If you currently have a contract with a COBRA vendor, they will more than likely handle this notice for you, please check with therm. Otherwise, if you are a Federal COBRA employer you must comply with this new law and proceed with the attached notice.
I know this is confusing. I would encourage you to visit the DOL website for additional information and for other applicable forms. http://www.dol.gov/ebsa/consumer_info_health.html#cobra
There is certainly more information on this new law that is not included in the above statement.
If you have any questions, please feel free to contact me and we can work our way through the jungles of COBRA together!
Qualifying Event Notice with Subsidy.doc
Jennifer Christiansen, General Manager
Life/Health & Human Resources
Phone: (805) 361-2985
Fax: (805) 347-4711