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COBRA Notices On Hold Again – Extension Uncertain

For COBRA Notices It’s Déjà Vu All Over Again
 
If you’re responsible for administering your company’s COBRA compliance program, the last few months may seem like a scene out of the movie Groundhog Day. Let us assure you that you’re probably not reliving the same COBRA nightmare on a daily basis, but monthly perhaps.
 
As most of you know, the latest in a series of extensions–4 to be exact–of the COBRA subsidy expired on June 1, 2010. The Senate left for its Memorial Day recess last week, deferring any action on a bill that would extend the COBRA subsidy. The American Workers, State, and Business Relief Act of 2010 (HR 4213) would have extended the COBRA subsidy to employees experiencing an involuntary termination through November 30, 2010. 
 
Earlier this year, both the House and Senate passed separate versions of a bill that would have extended the subsidy to involuntary terminations occurring through December 31, 2010, but in an effort to win votes from a handful of suddenly budget-conscious House moderates on the eve of the Memorial Day recess, Democrat leaders agreed to an amendment scaling back the benefit extension by one month.
 
Despite the amendment, House leaders feared they still could not secure enough votes to pass the bill before the recess and so they removed entirely the COBRA subsidy extension language from the bill, which then passed the House.
 
House members continue to debate a possible COBRA subsidy extension, but with the Senate in recess until June 7, we do not expect any significant action on the COBRA subsidy until Senators return.
 
The ultimate fate of the COBRA subsidy is now uncertain. Congress could go forward with an extension of the same 15-month and 65% subsidy, it could shorten that extension or reduce the duration or level of the subsidy, or simply let the COBRA subsidy program expire. Democrat leaders in the House have publicly discussed each of these options.
 
With this much uncertainty–again–we recommend taking a wait and see approach with your COBRA notices for involuntary terminations. If Congress extends the subsidy in any way, DOL will require employers to send out new COBRA notices reflecting the new eligibility dates. Rather than acting on your current reading of the Congressional tea leaves, we recommend putting your current COBRA notice program on hold for any involuntary termination occurring on or after June 1, 2010. As you know, employers have 30 days to notify their plan administrator of an employee termination (and the plan administrator–even if it’s the employer–then has 14 days to send a COBRA notice to qualified beneficiaries), so holding that process until the legislative picture is clearer still gives employers sufficient time to send out whatever notice may be required by any extension Congress passes. 
 
To learn more about COBRA go to http://www.dol.gov/ebsa/COBRA.html.

This update was provided by Worklaw Network firm Lehr Middlebrooks and Vreeland (www.lehrmiddlebrooks.com).

Categories: COBRA

UPDATE: COBRA Subsidy Extended Through May 31, 2010

April 22, 2010 1 comment

In the latest development in the continuing saga that is COBRA administration, late on Thursday, April 15th, Congress passed H.R. 4851, the Continuing Extension Act of 2010, and President Obama signed the measure into law later that same day.  The Extension Act extends the eligibility period for the COBRA continuation premium subsidy through May 31, 2010. The Act also includes extended election procedures for those employees who were involuntarily terminated during the window between March 31, 2010 and April 15, 2010, and requires plan administrators to send new notices.
 
As of the date of this writing, DOL had only published a statement from Assistant Secretary Phyllis Borzi about the extension and had updated the general COBRA premium fact sheet on its website. 
 
The good news is that this latest Extension Act really doesn’t seem to have changed anything drastically; we’re just dealing with a rehashed plot-line where you know the story: an extended deadline for the termination and loss of coverage dates, and notice requirements to make sure we get that word out to all qualified beneficiaries who may be eligible for the subsidy. (Do remember that we still have that change from the last law extending the subsidy where qualified beneficiaries may be eligible for the subsidy if they suffered a reduction in hours followed by an involuntary termination; this new Extension Act made no change to that wrinkle in subsidized COBRA, however.) 
 
While we know you all like to send out your COBRA notices very promptly – we regularly see them done concurrently with the termination – we recommend taking advantage of the actual notice time-periods in effect while we wait and see what the DOL provides in the way of new model notices. As you know, employers have 30 days to notify their plan administrator of an employee termination, and the plan administrator – even if it’s the employer – then has 14 days to send notice to qualified beneficiaries. Therefore, there really is no current rush to send out notices for post-March 31 terminations. 
 
We recommend that you closely track all of your terminations that occur following March 31, 2010 and administratively prepare yourself to rapidly send out notices once we (hopefully) receive guidance from DOL. If you have a third-party administrator, while there may not be an obvious reason not to go ahead and provide notice of the qualifying event to your administrator, doing so would require that your Administrator send out the COBRA notice within 14 days. It’s unlikely we will have the new model notices from DOL by that time. Therefore, take a little time before you notify your Administrator. 
 
If you are self-administered, diary those terminations for approximately 40 days so that you can have a comfort-level with the “wait and see” approach and know that you won’t miss the important deadline for sending out your COBRA notice. If all goes according to plan, we should have new DOL model notices before that time and you can rest easy knowing that the notice you send will be compliant with the Extension Act. 
 
If we get to the point where notices must be sent and we still don’t have new model notices from DOL, then you can go ahead and provide the current COBRA notices to terminated employees and provide a cover letter advising them that the President recently signed a bill extending coverage under the COBRA subsidy program to involuntary terminations occurring between March 31, 2010 and May 31, 2010, and that they should substitute “May 31, 2010” for all references to “March 31, 2010” shown on the notice.
 
This notice provided courtesy of Worklaw Network member Lehr, Middlebrooks and Vreeland (www.lehrmiddlebrooks.com).

Note: You can find the COBRA forms and info on HR That Works under Document Management/Termination section. Additional info can be found on the DOL website at http://www.dol.gov/ebsa/cobra.html

Categories: COBRA

COBRA Extended Again

On April 15, 2010, President Obama signed into law the Continuing Extension Act of 2010 (HR 4851), once again extending the COBRA subsidy eligibility period under ARRA, through May 31, 2010. The law takes immediate effect and is retroactive to April 1, 2010. 

The law makes the following changes:

  • New Sunset Date:  The COBRA subsidy eligibility period (for Qualifying Events on or after September 1, 2008) now ends on May 31, 2010. This period had expired on March 31, 2010. As a refresher, the subsidy is a 65 percent discount off the regular COBRA premium for up to 15 months. Only Assistance Eligible Individuals (AEIs) qualify for the subsidy.
  • Eligible Qualifying Events:  As before, two types of Qualifying Events are subsidy eligible. The first one is an involuntary termination of employment. The second one is a reduction in hours followed by an involuntary termination of employment if that involuntary termination occurs on or after March 2, 2010, and on or before May 31, 2010.

The new law does not change the length of the COBRA maximum coverage period. It is still based on the original reduction in hours Qualifying Event date. Also, the subsidy period (up to 15 months) is unchanged.  Watch for the updated info at http://www.dol.gov/ebsa/cobra.html.

Categories: COBRA