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COBRA Subsidy Gets (Yet Another) Extension

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| Legal Advisory

Last Thursday, Congress passed the Continuing Extension Act of 2010, which will extend the period of time during which participants may become eligible for the COBRA subsidy program through the end of May.  

The COBRA subsidy program enables an “assistance eligible individual” (AEI) who pays 35% of the COBRA premium for health coverage continuation to have the remaining 65% paid by the coverage provider for up to fifteen months, who is then reimbursed through a tax credit. With the enactment of the new law, AEIs will be defined as employees (and their beneficiaries) who between September 1, 2008 and May 31, 2010 became eligible for COBRA continuation coverage due to an “involuntary termination” of employment or due to a reduction of hours that rendered the employee ineligible for the employer’s health plan and who were later terminated involuntarily on or by May 31, 2010.

The extension enables those participants involuntarily terminated from employment prior to June 2010 to receive the COBRA subsidy upon their election to continue coverage and timely payment of their 35% premium share. It is important that individuals affected by the change, such as employees terminated in April or May 2010, be alerted to their eligibility under the new law. To review our earlier advisories about the mechanics of the COBRA subsidy and other amendments to the law, please click here.

The new law did not alter the maximum period of fifteen months during which an eligible participant can receive the subsidy. The fifteen month maximum period is due to expire in May 2010 for those individuals who have been receiving the COBRA subsidiary since its rollout in March 2009. The imminence of this subsidy period expiration for the first wave of AEIs suggests that Congress may consider additional changes to the COBRA subsidy program in the near future.

For more information or assistance with respect to COBRA compliance, the COBRA subsidy or its extension or other employment and employee benefit matters, please contact a member of Nutter McClennen & Fish LLP’s Labor, Employment and Benefits practice group.

This update is for information purposes only and should not be construed as legal advice on any specific facts or circumstances. Under the rules of the Supreme Judicial Court of Massachusetts, this material may be considered as advertising. 

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