On February 17, 2009, in an effort to ease the financial burden on so many Americans who have been recently laid off, President Obama signed into law the American Recovery and Reinvestment Act of 2009 (“ARRA”).
Under ARRA, employees “Involuntarily Terminated” from their employment (and other qualified beneficiaries) anytime from September 1, 2008 through December 31, 2009, and who are eligible for and elect COBRA, may receive a federal government subsidy to help pay for their COBRA premiums. They will be able to receive this federal government subsidy for up to 9 months. Employees and other qualified beneficiaries will only have to pay 35% of their regular COBRA premium, with the other 65% being paid by the federal government.
“Involuntary Termination” includes layoffs, failure to renew employment contracts, termination for good cause by employer action, or forced retirement packages, if after the offer period a certain number of remaining employees in employee’s particular group will be terminated. “Involuntary Termination” does not include voluntary resignation, divorce, dependent child ceasing to be dependent, death, or termination due to gross misconduct.
Employers are required to mail all eligible former employees (and other qualified beneficiaries) one of four different notices to notify them of the premium reduction and other rights provided to them under ARRA, including a second opportunity to sign up for COBRA. Each of the four types of notices is designed for a particular group of qualified beneficiaries and contains information to help satisfy ARRA’s notice provisions.
COBRA-eligible employees who lost their jobs between September 1, 2008 & February 16, 2009 (and other qualified beneficiaries) who either didn’t elect COBRA when offered, or elected COBRA but discontinued COBRA coverage have another chance to sign up for COBRA and get the reduced premium. Employers were given a deadline of April 18, 2009 to send all former employees in this particular group a letter informing them of their second chance to elect coverage.
To summarize, employers must do the following to comply with ARRA: (1) Identify the eligible individuals; (2) Calculate and report the subsidy to employees and the federal government; and (3) Provide the proper notice to all eligible individuals.
Employers should take note that if a qualified beneficiary becomes eligible for other health care coverage, the COBRA subsidy ceases. It is not necessary for the qualified beneficiary to actually obtain other health care coverage to lose the subsidy. All that is necessary is that the qualified beneficiary be eligible to receive the other health care coverage.
It is important that employers be careful to fully comply with the requirements of ARRA, as failure to apply the subsidy can mean tax penalties. Likewise, employees should take care not to miss an opportunity to receive the subsidy.
This article was written by Natalie C. Najarian, Associate at Demorest Law Firm. Click here to view her professional resume.
