Expansion of COBRA Coverage in Stimulus Package

Expansion of COBRA Coverage in Stimulus Package
Labor & Employment Alert

On February 17, 2009, President Barack Obama signed the American Recovery and Reinvestment Act of 2009 ("the Act"), an economic stimulus package that includes a COBRA subsidy for involuntarily terminated workers, known as “Premium Assistance for COBRA Benefits.” In short, the subsidy covers 65% of the COBRA premium for a period of nine (9) months for employees of a certain income level who were involuntarily terminated between September 1, 2008 and December 31, 2009. Employers, who are subject to various notice and reporting requirements, may receive an income tax credit to offset the subsidy.

This alert highlights key elements of the legislation related to this broad expansion of COBRA coverage.

An employer may amend current forms or provide an addendum to those forms to comply with these notice requirements Specifically, an employer should provide:

Such notice must be issued to participants (including already terminated employees) within 30 days of the date model notices are issued by the DOL. Because it appears that an employer need not wait for the DOL's model notice before amending its COBRA forms to comply with this requirement, it may be possible for employers to abbreviate the election period for previously terminated employees through such earlier notice.

These new provisions will have an immediate and far-reaching impact on an employer's obligations and will produce a labyrinth of new regulations. If you have any questions about how these changes may affect your business or personal situation, please contact Michael Furey, Scott Ohnegian, or Daniel Zappo of Riker Danzig's Labor & Employment Group.