On March 2, 2010, President Obama signed the Temporary Extension Act of 2010 (the “Act”). The Act extends the COBRA subsidy eligibility period to include individuals who are involuntarily terminated on or before March 31, 2010. The Act also, among other things, makes the following changes to the COBRA subsidy law first established in 2008 and amended in late 2009:

  • Reduction of Hours. Individuals who had a reduction of hours between September 1, 2008 and March 31, 2010, followed by an involuntary termination of employment on or after March 2, 2010, will be treated as incurring a qualifying event on the date of termination of employment. As a result, these individuals will be eligible for the COBRA subsidy. This is true whether or not the individual failed to elect COBRA continuation coverage after the reduction in hours or elected and then dropped such coverage. The period of COBRA continuation coverage is determined as though the qualifying event was the reduction of hours.
  • Notice. Employers who are the plan administrators of their group health plans must notify affected individuals within sixty (60) days following their involuntary termination of employment of the right to the COBRA subsidy. This notice must include information on the provisions of the Act. The Department of Labor has previously posted subsidy notice forms on its Web site and will undoubtedly do so again. Until then, employers will need to draft their own notices carefully to ensure that they fully comply with the initial COBRA subsidy legislation and each of the amendments that have followed.
  • Employer Discretion. The Act clarifies that the employer’s determination that a qualifying event was the individual’s involuntary termination of employment will be deemed accurate, provided that the determination is reasonable and the employer maintains supporting documentation.
  • Enforcement. If the Secretary of Labor or the Secretary of Health and Human Services determines that an individual is eligible for the COBRA subsidy, either the individual or the Secretary may bring a civil action to enforce that determination. The Secretary may also assess a penalty against the plan sponsor (usually the employer) or health insurance issuer of up to $110 per day for each failure to comply with the Secretary’s determination.

The U.S. Senate is currently considering additional legislation that would extend subsidy eligibility through December 31, 2010. If you have any questions regarding the COBRA extension or the notice obligations of the Act, please contact Meg Vergeront.

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