COBRA Premium Assistance Extension

Joseph P. Bonavita

Congress recently enacted the Department of Defense Appropriations Act of 2010 (“DODAA”), which extends the time period for individuals to become eligible for and receive COBRA premium assistance under the American Recovery and Reinvestment Act of 2009 ("ARRA"). 

New Assistance-Eligible Individuals

Under ARRA, an individual was eligible to receive a COBRA subsidy if the individual was involuntarily terminated between September 1, 2008 and December 31, 2009 and elected the subsidy/premium assistance ("Assistance Eligible" or an “Assistance Eligible Individual”).  If a former employee was Assistance Eligible, ARRA allowed the individual to pay only 35% of his/her COBRA premiums and required the former employer to pay 65% of the premiums (reimbursed by the government through payroll taxes) (“Premium Assistance”). 

The DODAA extends the time frame for an involuntarily terminated individual to become Assistance Eligible from December 31, 2009 to February 28, 2010.  Thus, in addition to employees involuntarily terminated between September 1, 2008 and December 31, 2009, individuals who are involuntarily terminated between December 31, 2009 and February 28, 2010 will now be Assistance Eligible.  These new Assistance Eligible Individuals are subject to the same election requirements, exclusions, and termination of Premium Assistance as under ARRA.

Extension of the Premium Assistance Period

The DOAA also extends the period during which an Assistance Eligible Individual is entitled to receive Premium Assistance.  Previously, Assistance Eligible Individuals were only entitled to Premium Assistance for a period of up to 9 months.  Under the DOAA, that period has been extended to 15 months (or when that individual’s maximum period of COBRA coverage ends, whichever is earlier).

As a result, Assistance Eligible Individuals who are currently receiving Premium Assistance, may now receive Premium Assistance for an extra 6 months beyond their previously anticipated expiration date.

In addition, Assistance Eligible Individuals who were receiving Premium Assistance, but are no longer receiving it because their 9-month period expired are granted a grace period during which they may re-instate the Premium Assistance for their COBRA.  Individuals who paid the full 100% of their COBRA premium in December 2009 because their Premium Assistance period expired (under the previous 9-month period) should either be credited for future months, now that they are entitled to up to 15 months of Premium Assistance, or should be reimbursed for their overpayment.  To continue coverage for up to 15 months, Assistance Eligible individuals must pay their 35% of the premium by February 17, 2010 or 30 days after they receive notice of the 15-month extension from the plan administrator.

Notice Requirements

Plan administrators must provide notice about these changes to the COBRA Premium Assistance provisions of ARRA.  This notice must be sent to individuals who become Assistance Eligible between now and February 28, 2010, as well as those Assistance Eligible Individuals who previously received notices of COBRA Premium Assistance under ARRA.

• Assistance Eligible Individuals currently receiving Premium Assistance must receive notice of the changes to ARRA by February 17, 2010.
• Assistance Eligible Individuals who are terminated on or after October 31, 2009, must be provided notice of the changes to ARRA within the normal timeframes for providing COBRA continuation notices.
• Assistance Eligible Individuals whose Premium Assistance expired under ARRA after 9-months (as long as those 9 months ended before December 19, 2009) must receive notice of the changes to ARRA within 60 days of the first day when their 9-month Premium Assistance first expired.

If you have any questions or would like a specific situation explored in more detail, please contact Joseph Bonavita or David Michael at 312.236.3003 (or by email at jbonavita@gouldratner.com or dmichael@gouldratner.com).     

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