January 13, 2010, the U.S. Department of Labor issued three new Model COBRA Notices for the COBRA subsidy amendment that was effective on December 19, 2009. (Click here to see our December 22, 2009 Employment Law Alert on the topic.) The amendment extended the sunset date for the COBRA subsidy from December 31, 2009, to February 28, 2010, and expanded the maximum subsidy from nine to 15 months. In addition, the requirement that the assistance eligible individual (AEI) lose coverage within the subsidy period of September 1, 2008 through February 28, 2010 was deleted, so that only the covered employee’s involuntary loss of employment must occur within the subsidy period. Finally, the amendment details how to handle AEIs who exceeded the former maximum nine-month subsidy and are eligible for up to six more months of the expanded subsidy. The three new Model COBRA Notices are each available for download as a “Word” document at http://www.dol.gov/ebsa/COBRAmodelnotice.html. Below is a summary of the pertinent changes to each form and requirements for each form’s use:1. Updated Model General NoticeThis notice is a revision of the former Model General Notice. Changes include the extended eligibility date of February 28, 2010, the new maximum subsidy of 15 months, and the deletion of the requirement that an AEI lose coverage, and employment, during the subsidy period of September 1, 2008 through February 28, 2010. This notice must be sent to covered employees (and their qualified beneficiaries), who experienced any qualifying event from September 1, 2008 through February 28, 2010, if such persons have not yet been sent a COBRA election notice. The deadline for sending this notice form is the usual COBRA requirement of 14 days after the qualifying event.2. Model Premium Assistance Extension NoticeThis notice is completely new. It speaks to persons who had previously received a COBRA election notice that did not explain the amendment, but who may be impacted by the retroactive nature of that amendment. AEIs who received nine months of COBRA subsidy and remained eligible for the expanded 15-month maximum subsidy, but dropped coverage at the end of the nine months, can re-enter COBRA by making retroactive payment of the 35% reduced premium. However, this payment must be made by February 17, 2010, within 30 days after receipt of this new notice, or by the end of an otherwise applicable payment grace period. Some AEIs continued COBRA coverage beyond the former nine month maximum subsidy by paying 100% of the premium. If those persons remained eligible for the expanded 15-month maximum subsidy, they can get a refund of 65% of the excess premiums they paid, or a credit toward future premiums. Although it is not entirely clear in the Model Premium Assistance Extension Notice, AEIs need to contact their plan administrator to make arrangements for a refund or credit. To compensate for this lack of clarity, employers sending out this notice should consider highlighting (by boldface type or some other method) the paragraph on the third page immediately above the line that says “For more information.” Alternatively, employers may wish to use the following in place of that paragraph: You may contact [enter appropriate contact information, e.g., the Plan Administrator or other party responsible for COBRA administration under the Plan] to confirm the correct amount of your first payment or to discuss payment issues related to the ARRA premium reduction. That would include questions arising from the fact that you received the full nine months of premium assistance required under ARRA and either did not make any payment for subsequent periods of coverage but now wish to take advantage of the extended period to fifteen months, or made payment of the 35% (or some other amount that is less than the full premium), or made payment of the full premium otherwise required to maintain coverage absent the subsidy and now wish to discuss obtaining a refund or credit. This new Model Premium Assistance Extension Notice must be sent to the following persons by the dates listed:- AEIs as of October 31, 2009 must receive this notice by no later than February 17, 2010. For example, Frank was involuntarily terminated under a reduction in force on September 1, 2009. He and his qualified beneficiaries elected and maintained COBRA coverage through October 31, 2009 (or beyond). They must receive the new Model Premium Assistance Extension Notice no later than February 17, 2010.
- Covered employees (and their beneficiaries) who experienced a termination of employment on or after October 31, 2009 which resulted in a loss of health coverage—as long as they did not receive an Updated Model General Notice—must be provided with this notice no later than February 17, 2010. For example, Kimberly was terminated due to the elimination of her job and lost health care coverage on November 30, 2009. She and her qualified beneficiaries must receive the new Model Premium Assistance Extension Notice no later than February 17, 2010.