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Employee Benefit Services
Phone: 973.299.0022
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COBRA Subsidy Extension Changes
On Dec. 19, 2009, the Department of Defense Appropriation Act, 2010 (2010 DOD Act), extended the COBRA premium reduction eligibility period for two months through February 28, 2010, and increased the maximum period for receiving the subsidy for an additional 6 months (from 9 to 15 months).
Individuals who have reached the end of the original premium reduction period will have additional time to pay extension-related reduced premiums that were due prior to notice being provided. To continue their coverage they must pay the 35 percent of premium costs by the later of February 17, 2010, 30 days after notice of the extension is provided by their plan administrator, or the end of the otherwise applicable payment grace period.
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.
- Makes a timely election of COBRA coverage.
Those who are eligible for other group health coverage (such as a spouse's plan) or Medicare are not eligible for the premium reduction. No premium reduction is available for premiums paid for periods of coverage that began before 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. For employer related COBRA subsidy administration, please click here.
Updated Model Notices
ARRA, as amended by the 2010 DOD Act, mandates that plans notify certain current and former participants and beneficiaries about the premium reduction.
The following model notices will help plans and individuals comply with these requirements. Each model notice is designed for a particular group of qualified beneficiaries and contains information to help satisfy ARRA's notice provisions, including those added by the 2010 DOD Act.
Plans subject to the Federal COBRA provisions must provide the updated General Notice to all qualified beneficiaries (not just covered employees) who experienced a qualifying event at any time from September 1, 2008 through February 28, 2010, regardless of the type of qualifying event, and who have not yet been provided an election notice. This model notice includes updated information on the premium reduction as well as information required in a COBRA election notice.
Note: Individuals who experienced a qualifying event (that was a termination of employment) in December 2009 but who were not eligible for COBRA coverage until January 2010 were likely not provided proper notice. These individuals should get the updated General Notice AND the full 60 days from the date the updated notice is provided to make a COBRA election.
Plan administrators must provide notice to certain individuals who have already been provided a COBRA election notice that did not include information regarding ARRA, as amended. This model Premium Assistance Extension Notice includes information about the changes made to the premium reduction provisions of ARRA by the 2010 DOD Act. Listed below are the affected individuals and the associated timing requirements.
- Individuals who were "assistance eligible individuals" as of October 31, 2009 (unless they are in a transition period - see below), and individuals who experienced a termination of employment on or after October 31, 2009 and lost health coverage (unless they were already provided a timely, updated General Notice) must be provided notice of the changes made to the premium reduction provisions of ARRA by the 2010 DOD Act by February 17, 2010;
- Individuals who are in a "transition period" must be provided this notice within 60 days of the first day of the transition period. An individual's "transition period" is the period that begins immediately after the end of the maximum number of months (generally nine) of premium reduction available under ARRA prior to its amendment. An individual is in a transition period only if the premium reduction provisions would continue to apply due to the extension from nine to 15 months and they otherwise remain eligible for the premium reduction.
Note: To some extent, the groups listed above overlap - creating a situation where an individual may be entitled to multiple notices. Providing the Premium Assistance Extension Notice by the earliest date required will satisfy the notice requirement(s).
Insurance issuers that provide group health insurance coverage must send the updated Alternative Notice to persons who became eligible for continuation coverage under a State law. Continuation coverage requirements vary among States and issuers should modify this model notice as necessary to conform it to the applicable State law. Issuers may also find the model Premium Assistance Extension Notice or the updated model General Notice appropriate for use in certain situations.
For more information on the extension of the COBRA premium reduction, see the updated fact sheet.
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.
Please visit our new pages dedicated to The American Recovery and Reinvestment Act of 2009 (ARRA) and, in particular, its COBRA provisions.
DOL Pages and Programs Related to the Recovery Act
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At AxisPointe, Your Business is Our Business!
AxisPointe, Inc.
Employee Benefit Services- 2001 Route 46,Suite 504A
Phone: 973.299.0022 | Fax: 973.299.0097
www.axispointeinc.com
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