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Monday, December 28, 2009

COBRA Subsidy Extended

By: Tommy Eden, Attorney

Several Alabama families will have a bit merrier Christmas based on the fact that the Employee Benefits Security Administration (EBSA) has extended the eligibility date for the COBRA premium subsidy for two additional months, through February 28, 2010. A provision in the 2010 Defense Appropriations Act (Act) authorized the extension. All Alabama employers should become familiar with this extension and coordinate with their service providers (typically in Alabama Blue Cross) to make sure the appropriate revised notices are used. Which can be downloaded at:

What the Extention Does:
• Extends the eligibility period for the COBRA in connection with the American Recovery and Reinvestment Act of 2009 (“ARRA”) premium reduction for individuals who are involuntarily terminated on or before February 28, 2010; and

• Extends the maximum period for receiving the subsidy by six months (from 9 months to 15 months). Those who had reached the end of the reduced premium period before the extension will have additional time to pay for certain subsequent coverage periods at the reduced 35% rate. For coverage periods that began prior to enactment of the Act, these individuals will need to pay 35 % of applicable premium costs by the later of February 17, 2010 (60 days after date of enactment, December 19, 2009) or 30 days after notice of the extension is provided by their plan administrator.

Employer Notice Requirement: Employers must provide an additional notice concerning the subsidy extension. The notice is required for individuals who, on or after October 31, 2009, either: 1) are “assistance eligible individuals” or experience a qualifying event (i.e. termination of employment) relating to COBRA continuation coverage. The notice must be sent within 60 days of enactment (no later than February 17, 2010), unless a qualifying event occurs after December 19, 2009. The notice must include information regarding the Act and must be sent in accordance with the general timing rules under existing COBRA regulations (44 days from the date of the qualifying event).

Retroactive Reinstatement Procedure: A separate notice is required for those who ceased to pay their COBRA premiums or paid it in full during the original
9 month subsidy period. These persons will be able to reinstate their coverage by paying the subsidized premiums.

Common Sense Counsel: All model COBRA notices and forms must be modified for use with your group health plan by inserting specific information and deleting inapplicable provisions. It is recommended that all notices be sent using the “proof of mailing” service available at the U.S. Post Office to avoid claims that you did not post in a timely manner. Penalties are $110 a day. The subsidy is an employer Federal Payroll Tax Credit on new IRS Form 941.

Tommy Eden is a Lee County native, an attorney with the local office of Constangy, Brooks & Smith, LLP and a member of the ABA Section of Labor and Employment Law and serves on the Board of Directors for the East Alabama SHRM Chapter. He can be contacted at or 334-246-2901. Blog at