On March 19, 2009, the Department of Labor issued important notices relating to the COBRA subsidy requirements enacted February 17, 2009. The following is a brief summary of the subsidy provisions and the notice requirements. Links to the new model notices and information released by the DOL are also provided.
Background
The stimulus package adopted February 17, 2009 includes a temporary premium reduction for COBRA coverage for eligible individuals. Some highlights of the subsidy provisions include:
Qualified individuals pay only 35% of the COBRA premium under their plan for up to 9 months;
The employer may recover the remaining 65% of the premium by taking the subsidy amount as a credit on its IRS Form 941 quarterly employment tax return;
Group health plans must give certain employees involuntarily terminated after August 31, 2008 (and their dependents) a “second chance” COBRA election;
Employers must provide notice of the availability of the subsidy and the second chance election – in some cases by April 18, 2009;
Employers must report the amount of the subsidy provided under their plans to the IRS and to the individuals receiving the subsidy.
Notice Requirements
Group health plans are required to supplement the COBRA election notices with information on the subsidy and the second chance election to all qualified beneficiaries who have qualifying events after August 31, 2008 and before January 1, 2010. The existing COBRA notice manner and timing requirements continue to apply, except that for individuals whose qualifying event occurred from September 1, 2008 through February 16, 2009, notice must be provided by April 18, 2009.
The notices must include the following information:
- The forms necessary for establishing eligibility for the premium reduction;
- Contact information for the plan administrator or other person maintaining relevant information in connection with the premium reduction;
- A description of the second election period (if applicable to the individual);
- A description of the requirement that the Assistance Eligible Individual notify the plan when he/she becomes eligible for coverage under another group health plan or Medicare and the penalty for failing to do so;
- A description of the right to receive the premium reduction and the conditions for entitlement; and
- If offered by the employer, a description of the option to enroll in a different coverage option available under the plan.
Model Notices:
http://www.dol.gov/ebsa/COBRAmodelnotice.html
FAQs for Employers on the COBRA Premium Reduction:
http://www.dol.gov/ebsa/faqs/faq-cobra-premiumreductionER.html
Expanded FAQs for Employees on the COBRA Premium Reduction:
http://www.dol.gov/ebsa/faqs/faq-cobra-premiumreductionEE.html
Updated FAQs for Employees on General COBRA Provisions:
http://www.dol.gov/ebsa/faqs/faq_consumer_cobra.html
DOL’s dedicated COBRA web site:
http://www.dol.gov/COBRA