03/05/2010  –  COBRA Subsidy Period Extended, with Added Administrative Requirements

COBRA Subsidy Period Extended, with Added Administrative Requirements

Congress has extended for a second time the COBRA subsidy eligibility period under The American Recovery and Reinvestment Act of 2009 (ARRA), this time making the subsidy available to an additional group of qualified individuals.

 

Enacted March 2, the Temporary Extension Act (TEA) extends ARRA to March 31, 2010, from February 28, 2010. It also makes the 65 percent premium reduction available to eligible individuals who experience a reduction in hours followed by an involuntary termination.

 

“This adds a new level of complexity to COBRA administration and new responsibilities for employers,” said compliance manager Jim Trimble, with Ceridian’s Finance & Regulatory Management department .

 

Currently under COBRA there is no “second qualifying event” for employees that follows a reduction in hours of employment because coverage was already lost as a result of the first event.

 

“If an individual is involuntarily terminated from employment between March 2, 2010, and March 31, 2010, the employer will now have to identify whether their hours were reduced as far back as September 2008 and they were offered COBRA at that time,” Trimble said. “The employer then needs to communicate that they may now have a new right to receive subsidized coverage.”    

 

If the individual did not elect coverage as a result of the reduction in hours of employment, Trimble said, they would be entitled to elect COBRA as of the involuntary termination of employment date, if they are eligible for the subsidy; any gap in coverage would be disregarded for the purposes of the pre-existing condition limitation.

 

“Payments for the ‘gap’ period would not be required,” Trimble said.

 

However, for a reduction of hours followed by an involuntary termination of employment (within the appropriate dates), the subsidy would start for a period of coverage beginning after the March 2 enactment date, he said. Since most periods of coverage start on the first of the month, April 1 through April 30, 2010, would be the first period of coverage after the date of enactment for most individuals.

 

“It should be noted, however, that periods of coverage that begin on March 3, 2010, or later, would apply for the subsidy,” Trimble added.

 

The new law does not change the length of the COBRA maximum coverage period. Measurement of the 18 months of COBRA is from the earlier reduction in hours of employment.

  

As your benefits partner, Ceridian will help guide you through the new changes. Please watch for upcoming issues of COBRAView. We are also keeping our eye on new ARRA legislation ahead.

 

The latest extension is just a 31-day stop gap measure. The Senate is currently considering HR 4213, the “American Workers, State, and Business Relief Act,” that would include extending the premium subsidy to employees laid off through December 31, 2010.

 

The Department of Defense Appropriations Act passed last December extended the subsidy’s eligibility period under ARRA for two months to February 28, and extended the maximum duration of the federal assistance from nine months to 15 months.