Main Menu
PDF

COBRA Subsidy Extended for Involuntary Terminations Through March 31, 2010

March 16, 2010

The American Recovery and Reinvestment Act of 2009 (ARRA), as amended, provides for premium reductions for health benefits under COBRA. Eligible individuals pay only 35% of their COBRA premiums; the remaining 65% is reimbursed to the employer through a tax credit.

To qualify, individuals must experience a COBRA qualifying event that is an involuntary termination of employment. The involuntary termination must generally occur during the period that began September 1, 2008 and, under the recent extension, ends on March 31, 2010. The premium reduction is available for the first 15 months of COBRA coverage.

Under the recent extension, certain individuals who previously lost coverage due to a reduction in hours may also qualify for the COBRA subsidy and a second election opportunity. Specifically, a second election opportunity is available to workers if (1) their hours were reduced between September 1, 2008 through March 31, 2010 and they lost health coverage due to the reduction in hours, (2) they are subsequently involuntarily terminated from employment between March 2, 2010 and March 31, 2010, and (3) they did not make (or made and discontinued) an election for COBRA due to the reduction in hours. Note, this rule does not operate to extend the qualified beneficiary’s maximum COBRA coverage period; the maximum COBRA coverage period is still measured based on the original reduction in hours. If an individual elects COBRA under these circumstance, the COBRA coverage is not retroactive and individuals are not responsible for retroactive premium payments.

The Plan Administrator must provide a notice to qualified beneficiaries during the 60 day period beginning on the date of the involuntary termination containing the new information.

Related Practices

Join our email list to receive legal advisories, informative newsletters and event invites based on topics relevant to you.
Subscribe to Updates
Back to Page
{ footer Image }