Background
Under the American Recovery and Reinvestment Act of 2009, employees who were involuntarily terminated from their jobs between Sept. 1, 2008 and Dec. 31, 2009 were eligible for a COBRA subsidy for nine months. Employees paid 35 percent of the COBRA premium and employers paid 65 percent. Employers recovered this 65 percent subsidy by claiming a credit against payroll taxes on Form 941. This COBRA subsidy has now been extended under the Department of Defense Appropriations Act.
Discussion
The Department of Defense Appropriations Act, which became law on Dec. 19, 2009, extends the existing COBRA subsidy as follows:
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The eligibility period has been extended by two months. Under the new law, the subsidy is available to employees who are involuntarily terminated from their jobs between Sept. 1, 2008 and Feb. 28, 2010.
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The subsidy is now available for 15 months instead of nine months.
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Individuals who dropped COBRA coverage after their nine-month subsidy period ended must be given the opportunity to reinstate their COBRA coverage by retroactively paying premiums.
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Individuals who paid the full premium for COBRA coverage after their nine-month subsidy ended must be provided with a refund or credit against future premiums.
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Employers must provide notice of the extension by Feb. 17, 2010 to assistance eligible individuals and to employees who terminate employment on or after Oct. 31, 2009.
How to take action
Employers should work with their COBRA administrators to implement the new extension and issue the required notices.
For more information
If you have questions, please contact AuldridgeGriffin.
