Congress Extends COBRA Premium Subsidy
Employers Must Take Action To Provide This Extension And Notice Thereof To Eligible Individuals (Or Face Penalties)
Congress has tinkered with COBRA again, by extending the subsidy for COBRA premiums enacted last year. As discussed below, this extension will result in a lot of administrative work for employers, since they must notify certain COBRA recipients of, and make COBRA coverage available in accordance with, the extension. In general, if an employer maintains a group health care plan, then the employer (as plan administrator) is responsible for ensuring that COBRA coverage, which complies with the law, is made available to qualifying individuals, and that qualifying individuals receive appropriate notice of the coverage. Any failure to meet this responsibility could result in a penalty of up to $100/ day/failure being imposed on the employer.
New Requirements
In the face of rising unemployment, in early 2009, Congress provided a “subsidy” for a monthly COBRA premium, under which an eligible individual was required to pay only 35% of the amount otherwise charged. The subsidy applied to 9 monthly COBRA premiums. To be an eligible individual, among other requirements, the individual had to have an involuntary termination from employment that occurred during the period of September 1, 2008 through December 31, 2009. Congress has now extended the subsidy by lengthening: (1) the period during which the involuntary termination of employment must occur to qualify for the subsidy for two months (from January 1, 2010 to February 28, 2010) and (2) the maximum period for receiving the subsidy for an additional six months (from nine to 15 months).
Administrative Burdens
In accordance with its responsibility to make COBRA coverage available-as enforced by the $100/day/failure penalty-an employer must allow additional individuals (those with involuntary terminations from January 1, 2010 through February 28, 2010) to use the subsidy to reduce their monthly COBRA premiums, and must allow all eligible individuals to use the subsidy for a total of 15 months. This may take a lot of administrative work. An employer must identify those additional and eligible individuals. It must also adjust its recordkeeping systems to accept COBRA premium payments, as reduced by the subsidy, when paid by one of those individuals, and possibly allow refunds or credits against future premiums if an eligible individual pays a premium without using the subsidy. In certain cases, the employer will have to allow an individual to retroactively pay a subsidy-reduced COBRA premium due for December or January.
Enhanced Notice Requirements
Further, an employer is required to furnish notices describing the subsidy to eligible individuals and others. In the case of an individual who has a termination of employment on or after December 19, 2009, the employer’s COBRA notice must be updated to reflect the extension of the subsidy and provided to that individual within the normal timeframe for providing a COBRA notice. For an earlier termination, a separate notice explaining the extension must be prepared and provided to the individual and family.
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