The Temporary Extension Act extends the COBRA subsidy program that was enacted under the American Recovery and Reinvestment Act.

The law’s COBRA provisions:

• Extend the eligibility period for the 15-month 65 percent premium subsidy to those involuntarily terminated from March 1 through March 31, 2010.

• Allow employees to receive the subsidy if they first lost group coverage due to a reduction in hours and then were terminated after enactment of the bill.

The information contained herein is for informational purposes only and is not intended as legal or tax advice, nor is it intended to advise you of your obligations under ERISA, COBRA, HIPAA or the American Recovery and Reinvestment Act of 2009. It should not be used or relied upon as the basis for any action or choosing inaction. Consult an experienced benefits attorney or tax professional about your specific situation before deciding on any course of action or inaction.

(b) Extension of Maximum Duration of Assistance.—Subsection (a)(2)(A)(ii)(I) of such section is amended by striking “9 months” and inserting “15 months”.

(c) Rules Related to 2009 Extension.—Subsection (a) of such section is further amended by adding at the end the following:

“(16) Rules Related to 2009 Extension.—

“(A) Election to pay Premiums Retroactively and Maintain COBRA Coverage.—In the case of any premium for a period of coverage during an assistance eligible individual’s transition period, such individual shall be treated for purposes of any COBRA continuation provision as having timely paid the amount of such premium if—

“(i) such individual was covered under the COBRA continuation coverage to which such premium relates for the period of coverage immediately preceding such transition period, and

“(ii) such individual pays, not later than 60 days after the date of the enactment of this paragraph (or, if later, 30 days after the date of provision of the notification required under subparagraph (D)(ii)), the amount of such premium, after the application of paragraph (1)(A).

“(B) Refunds and Credits for Retroactive Premium Assistance Eligibility.—In the case of an assistance eligible individual who pays, with respect to any period of COBRA continuation coverage during such individual’s transition period, the premium amount for such coverage without regard to paragraph (1)(A), rules similar to the rules of paragraph (12)(E) shall apply.

“(C) Transition Period.—

“(i) In General.—For purposes of this paragraph, the term ‘transition period’ means, with respect to any assistance eligible individual, any period of coverage if—

“(I) such period begins before the date of the enactment of this paragraph, and

“(II) paragraph (1)(A) applies to such period by reason of the amendment made by section 1010(b) of the Department of Defense Appropriations Act, 2010.

“(ii) Construction.—Any period during the period described in subclauses (I) and (II) of clause (i) for which the applicable premium has been paid pursuant to subparagraph (A) shall be treated as a period of coverage referred to in such paragraph, irrespective of any failure to timely pay the applicable premium (other than pursuant to subparagraph (A)) for such period.

“(D) Notification.—

“(i) In General.—In the case of an individual who was an assistance eligible individual at any time on or after October 31, 2009, or experiences a qualifying event (consisting of termination of employment) relating to COBRA continuation coverage on or after such date, the administrator of the group health plan (or other entity) involved shall provide an additional notification with information regarding the amendments made by section 1010 of the Department of Defense Appropriations Act, 2010, within 60 days after the date of the enactment of such Act or, in the case of a qualifying event occurring after such date of enactment, consistent with the timing of notifications under paragraph (7)(A).

“(ii) To Individuals Who Lost Assistance.—In the case of an assistance eligible individual described in subparagraph (A)(i) who did not timely pay the premium for any period of coverage during such individual’s transition period or paid the premium for such period without regard to paragraph (1)(A), the administrator of the group health plan (or other entity) involved shall provide to such individual, within the first 60 days of such individual’s transition period, an additional notification with information regarding the amendments made by section 1010 of the Department of Defense Appropriations Act, 2010, including information on the ability under subparagraph (A) to make retroactive premium payments with respect to the transition period of the individual in order to maintain COBRA continuation coverage.

“(iii) Application of Rules.—Rules similar to the rules of paragraph (7) shall apply with respect to notifications under this subparagraph”.

(d) Clarification that Eligibility and Notice is Based on Timing of Qualifying Event.—Subsection (a) of such section is amended—

(1) in paragraph (3)(A)—

(A) by striking “at any time” and inserting “such qualified beneficiary is eligible for COBRA continuation coverage related to a qualifying event occurring”; and

(B) by striking “, such qualified beneficiary is eligible for COBRA continuation coverage”; and

(2) in paragraph (7)(A), by striking “become entitled to elect COBRA continuation coverage” and inserting “have a qualifying event relating to COBRA continuation coverage”.

(e) Effective Date.—The amendments made by this section shall take effect as if included in the provisions of section 3001 of division B of the American Recovery and Reinvestment Act of 2009 to which they relate.

(f) Emergency Designations.—

(1) In General.—Amounts in this section are designated as emergency requirements and necessary to meet emergency needs pursuant to sections 403 and 423(b) of S. Con. Res. 13 (111th Congress), the concurrent resolution on the budget for fiscal year 2010.

(2) PAYGO.—All applicable provisions in this section are designated as an emergency for purposes of pay-as-you-go principles.

The American Recovery and Reinvestment Act of 2009 (ARRA), as amended on December 19, 2009 by the Department of Defense Appropriations Act, 2010 (2010 DOD Act) provides for premium reductions for health benefits under the Consolidated Omnibus Budget Reconciliation Act of 1985, commonly called COBRA. Eligible individuals pay only 35 percent of their COBRA premiums and the remaining 65 percent is reimbursed to the coverage provider through a tax credit. To qualify, individuals must experience a COBRA qualifying event that is the involuntary termination of a covered employee’s employment. The involuntary termination must occur during the period that began September 1, 2008 and ends on February 28, 2010. The premium reduction applies to periods of health coverage that began on or after February 17, 2009 and lasts for up to 15 months.

What is COBRA?

COBRA gives workers and their families who lose their health benefits the right to purchase group health coverage provided by the plan under certain circumstances.

If the employer continues to offer a group health plan, the employee and his/her family can retain their group health coverage for up to 18 months by paying group rates. The COBRA premium may be higher than what the individual was paying while employed but generally the cost is lower than that for private, individual health insurance coverage.

The plan administrator must notify affected employees of their right to elect COBRA. The employee and his/her family each have 60 days to elect the COBRA coverage; otherwise, they lose all rights to COBRA benefits.

COBRA generally does not apply to plans sponsored by employers with fewer than 20 employees. Many States have similar requirements for insurance companies that provide coverage to small employers. The premium reduction is available for insurers covered by these State laws.

Changes Regarding COBRA Continuation Coverage Under ARRA, as amended by the 2010 DOD Act

The 2010 DOD Act extended the COBRA premium reduction eligibility period for two months until February 28, 2010 and increased the maximum period for receiving the subsidy for an additional six months (from nine to 15 months).

In addition, individuals who had reached the end of the reduced premium period before the legislation extended it to 15 months will have an extension of their grace period to pay the reduced premium. To continue their coverage they must pay the 35 percent of premium costs by February 17, 2010, or, if later, 30 days after notice of the extension is provided by their plan administrator.

Individuals who lost their subsidy and paid the full 100 percent premium in December 2009 should contact their plan administrator or employer sponsoring the plan to discuss a credit for future months of coverage or a reimbursement of the overpayment.

Eligibility for the Premium Reduction: The premium reduction for COBRA continuation coverage is available to “assistance eligible individuals”.

An “assistance eligible individual” is the employee or a member of his/her family who:

• has a qualifying event for continuation coverage under COBRA or a State law that provides comparable continuation coverage (for example, so-called “mini-COBRA” laws) that is the employee’s involuntary termination at any point from September 1, 2008 through February 28, 2010; and
• elects COBRA coverage timely.

Those who are eligible for other group health coverage (such as a spouse’s plan) or Medicare are not eligible for the premium reduction. There is no premium reduction for premiums paid for periods of coverage that began prior to February 17, 2009.

Assistance eligible individuals who pay 35 percent of their COBRA premium are treated as having paid the full amount. The premium reduction (65 percent of the full premium) is reimbursable to the employer, insurer or health plan as a credit against certain employment taxes.

Period of Coverage

The premium reduction applies to periods of coverage beginning on or after February 17, 2009. A period of coverage is a month or shorter period for which the plan charges a COBRA premium. The premium reduction for an individual ends upon eligibility for other group coverage (or Medicare), after 15 months of the reduction, or when the maximum period of COBRA coverage ends, whichever occurs first. Individuals paying reduced COBRA premiums must inform their plans if they become eligible for coverage under another group health plan or Medicare.

Notice Requirements

ARRA, as amended, mandates the provision of certain notices. As part of the COBRA election notice, plan administrators must provide information about the premium reduction to all individuals who have COBRA qualifying events from September 1, 2008 through February 28, 2010.

Plan administrators must also provide notice about the changes made to the premium reduction provisions of ARRA by the 2010 DOD Act to individuals who have already been provided a COBRA election notice (unless the election notice included the updated premium reduction information).

• Individuals who are “assistance eligible individuals” must be provided this notice by February 17, 2010;
• Individuals who experience a termination of employment on or after October 31, 2009 and lose health coverage must be provided this notice within the normal timeframes for providing continuation coverage notices; and
• Individuals who are in a “transition period” (a period that begins immediately after the end of the nine months of premium reduction in effect under ARRA before the amendments made by the 2010 DOD Act, as long as those nine months ended before December 19, 2009 and the premium reduction provisions of the 2010 DOD Act would apply due to the extension from nine to 15 months) must be provided this notice within 60 days of the first day of the transition period.

Expedited Review of Denials of Premium Reduction: Individuals who are denied treatment as assistance eligible individuals and thus are denied eligibility for the premium reduction (whether by their plan, employer or insurer) may request an expedited review of the denial by the U.S. Department of Labor. The Department must make a determination within 15 business days of receipt of a completed request for review. The official application form is available at www.dol.gov/COBRA and can be filed online or submitted by fax or mail.

Switching Benefit Options: If an employer offers additional coverage options to active employees, the employer may (but is not required to) allow assistance eligible individuals to switch the coverage options they had when they became eligible for COBRA. To retain eligibility for the ARRA premium reduction, the different coverage must have the same or lower premiums as the individual’s original coverage. The different coverage cannot be coverage that provides only dental, vision, a health flexible spending account, or coverage for treatment that is furnished in an on-site facility maintained by the employer.

Income limits: If an individual’s modified adjusted gross income for the tax year in which the premium assistance is received exceeds $145,000 (or $290,000 for joint filers), then the amount of the premium reduction during the tax year must be repaid. For taxpayers with adjusted gross income between $125,000 and $145,000 (or $250,000 and $290,000 for joint filers), the amount of the premium reduction that must be repaid is reduced proportionately. Individuals may permanently waive the right to premium reduction but may not later obtain the premium reduction if their adjusted gross incomes end up below the limits. If you think that your income may exceed the amounts above, consult your tax preparer or contact the IRS at www.irs.gov.

This fact sheet has been developed by the U.S. Department of Labor, Employee Benefits Security Administration, Washington, DC 20210. It will be made available in alternate formats upon request: Voice phone: 202.693.8664; TTY: 202.501.3911. In addition, the information in this fact sheet constitutes a small entity compliance guide for purposes of the Small Business Regulatory Enforcement Fairness Act of 1996.

Release Date: December 21, 2009
Contact Name: Gloria Della or Joseph De Wolk
Phone Number: 202.725.8422/202.579.4681

Statement of Phyllis C. Borzi on COBRA subsidy extension

Washington, DC – Phyllis C. Borzi, Assistant Secretary of the Employee Benefits Security Administration (EBSA) today released the following statement regarding the Consolidated Omnibus Budget Reconciliation Act (COBRA) and the recent extension of the premium reduction under the COBRA subsidy:

“I am pleased Congress has acted and the President has signed the Fiscal Year 2010 Defense Appropriations Act. The act extends the eligibility period for the COBRA premium reduction for an additional two months (through Feb. 28, 2010) and the maximum period for receiving the subsidy for an additional six months (from nine to 15 months). Millions of unemployed Americans and their families will be better able to afford and keep their health benefit coverage because of this new law.

“Individuals who had reached the end of the reduced premium period before the legislation extended it to 15 months will have additional time to pay the reduced premiums related to the extension. To continue their coverage they must pay the 35% of premium costs by (60 days after date of enactment) or, if later, 30 days after notice of the extension is provided by their plan administrator.

“We encourage you to subscribe to our COBRA Web site, www.dol.gov/cobra, to get information on new notice requirements, updated guidance, fact sheets, and frequently asked questions as they become available.

“Individuals should contact their plan or health insurance provider for information regarding the extension under their health plan. If you need further assistance contact an EBSA Benefits Advisor toll-free at 1-866-444-3272.”

U.S. Department of Labor news releases are accessible on the Department’s Newsroom page. The information in this news release will be made available in alternate format (large print, Braille, audio tape or disc) from the COAST office upon request. Please specify which news release when placing your request at 202.693.7828 or TTY 202.693.7755. The Labor Department is committed to providing America’s employers and employees with easy access to understandable information on how to comply with its laws and regulations. For more information, please visit the Department’s Compliance Assistance page.

Specifically, H.R. 3930 would extend the ARRA COBRA subsidy eligibility to those who are involuntarily terminated between January 1 and June 30, 2010 and extend the maximum period of assistance to 15 months. 

H.R. 3930 also includes a six-month extension of COBRA coverage. For individuals who are eligible for COBRA as a consequence of termination (or reduction in hours) of employment “occurring on or after April 1, 2008 and before January 1, 2010, if the maximum required period of COBRA continuation coverage is 18 months, such period is extended to 24 months.”  The Council is seeking clarification of this legislative language, however, as the time frame for eligibility for this six month extension is inconsistent with timeframes that appear in the introduction to the bill and other section headings. 

This measure could be included as part of comprehensive health care reform legislation, currently pending in both chambers of Congress or in legislation extending unemployment benefits and other expiring provisions of the stimulus legislation. H.R. 3200, the Affordable Health Care for America Act in the House already includes a provision extending the duration of COBRA coverage.

Seminar Date: 3.24.2009 arra-presentation-2

Statement of Secretary of Labor Hilda L. Solis on COBRA subsidy under American Recovery and Reinvestment Act of 2009

Washington – Secretary of Labor Hilda L. Solis today issued the following statement regarding the Consolidated Omnibus Budget Reconciliation Act (COBRA) and the premium reduction under the American Recovery and Reinvestment Act (ARRA):

“America’s workers and employers are the most productive in the world. With the labor and capital markets under financial stress, the Obama Administration is working to provide relief to American families. In February, the President signed into law the American Recovery and Reinvestment Act to create jobs, provide training opportunities for new jobs, extend unemployment benefits and help relieve the burden of health benefits.

“These programs are vitally important to the economic well-being of people who lost their jobs. Right now the federal government is beginning to implement the law to meet some of the basic needs of its citizens.

 “The ARRA provides a 65 percent tax subsidy for the cost of health benefits, making them more affordable for the unemployed and their families. Millions of individuals, including those who previously declined employer-provided coverage under COBRA, will be eligible to receive a subsidy on their premiums for up to nine months.

“Today the Labor Department is publishing more information to help the public understand how the program works and how they can qualify for the premium subsidy for continuation of health coverage under private, state and federal programs. The model notices we are releasing enable employers to quickly spell out for former employees and their families how to take advantage of COBRA coverage and the subsidy.

 “This administration is committed to putting Americans back to work so they can re-build the financial fabric of their lives. And the Labor Department is working quickly to make that happen.”

Additional information is available at www.dol.gov/COBRA.

U.S. Department of Labor news releases are accessible on the Department’s Newsroom page. The information in this news release will be made available in alternate format (large print, Braille, audio tape or disc) from the COAST office upon request. Please specify which news release when placing your request at 202.693.7828 or TTY 202.693.7755. The Labor Department is committed to providing America’s employers and employees with easy access to understandable information on how to comply with its laws and regulations. For more information, please visit the Department’s Compliance Assistance page.

Since this is one of the most frequently asked questions to our call center, we thought it was worth highlighting it with this blog entry as follows:

It appears that the revised Form 941 provides in line 15 a place to identify your credit amount and note whether you want to apply the credit to the next return or to have the IRS send you a refund.

Specifically, Form 941 Instructions state on page 6, Item 15 Overpayment: “If line 13 is more than line 10, write the difference in line 15. Never make an entry in both lines 14 and 15.

If line 15 is under $1, we will send a refund or apply it to your next return only if you ask us in writing to do so.”

The information contained herein is for informational purposes only and is not intended as legal or tax advice, nor is it intended to advise you of your obligations under ERISA, COBRA, HIPAA or the American Recovery and Reinvestment Act of 2009.