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CCH® BENEFITS — 09/06/11

COBRA Subsidy Ends 15 Months After COBRA Begins, EBSA Clarifies

from Spencer’s Benefits Reports: For most individuals, the COBRA premium reduction subsidy ended on Aug. 31, 2011, but there is one exception: workers laid off on or before May 31, 2010, whose COBRA coverage was postponed as a result of a severance agreement allowing them to continue active-employment coverage for a period after termination of employment.

The Department of Labor’s Employee Benefits Security Administration (EBSA) on August 30 announced it had updated Question 1 of the Frequently Asked Questions on the COBRA premium reduction (or subsidy) implemented through the American Recovery and Reinvestment Act (ARRA) to clarify the end date of the program.

ARRA provided a COBRA premium reduction for eligible individuals (and their covered dependents) whose employment was involuntarily terminated through the end of May 2010. Due to the statutory sunset, the COBRA premium reduction under ARRA is not available for individuals who experience involuntary terminations after May 31, 2010. The subsidy is available for up to 15 months from the date the eligible individual actually lost active coverage due to the employment termination and when COBRA actually began.

FAQ 1 asks whether it is true that the subsidy program ends on Aug. 31, 2011. EBSA’s answer, in part, follows:

Not necessarily, some individuals will still be eligible to receive the subsidy beyond Aug. 31, 2011. However, individuals who qualified on or before May 31, 2010, may continue to pay reduced premiums for up to 15 months, as long as they are not eligible for another group health plan or Medicare even if their COBRA coverage did not start until a later date due to the terms of a severance arrangement, or the use of banked hours or other similar provision that delayed the start of their COBRA coverage. For example, if an individual were involuntarily terminated on May 31, 2010, and due to the terms of a severance agreement their COBRA coverage did not start until Dec.1, 2010, they would still be eligible for the full 15 months of subsidy through Feb. 29, 2012, as long as they are not eligible for another group health plan or Medicare.

For more information, visit http://www.dol.gov/ebsa/faqs/faq-cobra-premiumreduction.html.

For more information on this and related topics, consult the CCH Pension Plan Guide, CCH Employee Benefits Management, and Spencer's Benefits Reports.

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