March 2, 2010 Stop-Gap Legislation Extends COBRA Subsidy

Last night, President Obama signed legislation that extends the eligibility period for the federal COBRA premium subsidy through March 31, 2010. Absent this legislation, employees involuntarily terminated after February 28, 2010 would not have been eligible for the COBRA subsidy. Future extensions of the premium subsidy are likely. Indeed, the Senate is currently considering legislation that will continue the extension through the remainder of 2010.

In addition to extending the COBRA subsidy period, the newly-signed legislation also expands the definition of "assistance eligible individual" to include individuals who are terminated after experiencing a reduction in hours. As originally enacted, the subsidy applied only to individuals (and their qualified dependents) who were eligible for COBRA because of an involuntary termination during the subsidy eligibility period. Now, if an individual experiences (or has experienced) a COBRA-qualifying reduction in hours on or after September 1, 2008, and is subsequently terminated, the individual (and his/her qualified dependents) will be eligible for the subsidy on the basis of the reduction in hours.

Finally, the legislation also provides that government agencies may assess monetary penalties and file civil actions for violations of the COBRA subsidy provisions.      

What This Means

Covered employers will be required to provide a new round of COBRA subsidy notices to individuals who are eligible for the subsidy as a result of a reduction in hours followed by an involuntary termination. In addition, COBRA notices for newly-terminated employees should be updated to reflect the new COBRA subsidy extension. It is likely the Department of Labor will issue new model COBRA subsidy notices soon. Finally, employers should expect additional extensions of the subsidy period in coming weeks.

This E-Update was authored by Lisa Frank and Brenda Kasper.  For more information, please contact Ms. Frank, Ms. Kasper or any other Paul, Plevin attorney by calling (619) 237-5200.