As you may have heard, the stimulus bill signed by President Obama on February 17, 2009 provides up to a nine-month COBRA subsidy for eligible employees who are involuntarily terminated between September 1, 2008 and December 31, 2009. During the subsidy period, eligible individuals will be required to pay only 35% of the COBRA premium. The remaining 65% of the COBRA premium is initially borne by the employer, but will be reimbursed by the federal government when the employer seeks a credit on employment taxes or requests direct reimbursement.
Only employees who have been involuntarily terminated are eligible for the COBRA premium subsidy – so employees who have resigned or have retired are not eligible for the subsidy. For employees who were previously involuntarily terminated and originally declined COBRA coverage, the former employer must provide them with a written notice of their right to elect coverage by April 17, 2009, along with any forms necessary for them to establish their eligibility for the premium subsidy. The employees will have 60 days after receiving the notice to elect COBRA coverage. Should someone in that group elect COBRA coverage, the coverage will be effective retroactive to March 1, 2009. The COBRA premium subsidy applies to all premiums due from the former employee – even that portion of the premium related to coverage for family members. Also, the COBRA premium subsidy is available to qualified beneficiaries who elect COBRA as a result of the involuntary termination.
The COBRA premium subsidy is also required for state-mandated continuation coverage. That means small employers who are not subject to COBRA may still be required to make the subsidy available. The Department of Labor will be publishing the required notices no later than mid-March 2009. Employers with questions regarding the COBRA premium subsidy should consult with their employment law attorney to make sure their practices comply with this new law.
