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Employee Benefits Client Alert
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John McMorrow
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December 11, 2009
No Premium Subsidy For
Qualified Beneficiaries Eligible For COBRA On Or After January 1, 2010
[Questions Regarding Current Eligibility for the COBRA Premium Reduction (Dec. 2, 2009)] Available at http://www.dol.gov/ebsa/faqs/faq-cobra-arra.html
Under the COBRA premium assistance rules, to be an assistance eligible individual (AEI), a COBRA qualified beneficiary must (1) be eligible for COBRA during the period that begins 9/1/08 and ends 12/31/09, (2) have a qualifying event of involuntary termination of the covered employee's employment during that period, and (3) elect COBRA.  The latest FAQs on the DOL website address two potentially tricky timing rules regarding who is eligible for premium assistance and for how long.
  • Q&A-1 clarifies that, under current law, an individual who does not become eligible for COBRA until after December 31, 2009 is not eligible for assistance, even if the involuntary termination of employment occurs on or before December 31, 2009.

  • Q&A-2 clarifies that once an individual becomes an AEI (with involuntary termination and COBRA eligibility both occurring by December 31, 2009), he or she will continue to be eligible for a full nine months of premium assistance even if that period extends beyond December 31, 2009. In the example given in the Q&A, if an AEI started COBRA on November 1, 2009, the individual would be entitled to nine months of ARRA premium assistance from November 1, 2009 through July 31, 2010 so long as the individual remained eligible.  (Under the rules, the period of premium assistance could be cut short, for example, if required premiums were not paid or if the AEI became entitled to Medicare or other group health plan coverage.)
The answers to both FAQs note that legislation pending in Congress to extend the premium assistance rules could change the answers to these questions.  Even though the exact timing and terms remain uncertain, employers should be prepared for an extension as Congress seems poised to pass one. Until such an extension occurs, these FAQs may surprise employees terminated in December but covered by health plans that extend "active" coverage until the end of the month.  Under the DOL's interpretation of the current rules, those employees will miss out on premium assistance for themselves (and their family members) by one day because they will not technically become eligible for COBRA until January 1, 2010 (the day after they lose active coverage).
This client alert is intended to inform you of developments in the law and to provide information of general interest.   It is not intended to constitute legal advice regarding a client's specific legal problems and should not be relied upon as such.  This client alert may be considered advertising under the rules of the Massachusetts Supreme Judicial Court.