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The Library
COBRA Subsidy Extended
On December 21, 2009, President Obama signed the Department of Defense Appropriations Act, 2010 (“DODAA”). Tagged on near the very end of DODAA is language that extends the COBRA subsidy under the American Recovery and Reinvestment Act of 2009 (“ARRA”).
DODAA extends the COBRA premium subsidy to individuals involuntarily terminated through February 28, 2010 (previously December 31, 2009).
DODAA extends the COBRA subsidy period from nine (9) months to fifteen (15) months. Thus, an individual who would have lost the COBRA subsidy in December may still be eligible for the subsidy though June 2010.
Individuals who reached the end of their original COBRA subsidy will have a transition period to pay their COBRA subsidized premium. To continue coverage during the transition period, they must pay 35% of the premium costs no later than February 17, 2010 or within 30 days after the new notice of extension is mailed, whichever is later.
Plan administrators must provide an additional notice of extension (1) to individuals who at any time on or after October 31, 2009, were eligible for the subsidy and (2) to individuals who experience a qualifying event based on termination of employment on or after October 31, 2009.
Thorp Reed & Armstrong Comment: No new notice is required for individuals who failed to elect COBRA or ceased to be eligible for COBRA.
This notice must be furnished no later than February 17, 2010.
In the case of certain individuals who lost their subsidized coverage (either because they paid the full premium or failed to pay any premium), the notice must be furnished, generally, no later than January 29, 2010.
Individuals who paid the full COBRA premium for coverage during the DODAA-extended period will be eligible for a refund or a credit against premium payments.
DODAA also clarifies that eligibility for the COBRA subsidy is based on the timing of the qualifying event, not when coverage is lost.
We anticipate additional guidance on this subsidy extension as well as new model notices from the DOL.
For more information, please contact:
Sarah Lockwood Church 412 394 7731 schurch@thorpreed.com
Kristen Belz Ornato 412 394 7749 kornato@thorpreed.com
Paul A. Kasicky 412 394 2441 pkasicky@thorpreed.com
Kevin A. Wiggins 412 394 2401 kwiggins@thorpreed.com
This Thorp Reed & Armstrong, LLP Communiqué is prepared in summary form and should not be construed as legal advice or opinion on any specific fact or circumstance. We do not assume any responsibility to revise this Communiqué if there are subsequent changes in the law.
IRS CIRCULAR 230 NOTICE: To ensure compliance with requirements imposed by the Internal Revenue Service, we inform you that any U.S. tax advice contained in this communication (or in any attachment) is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or matter addressed in this communication (or in any attachment).
#1072919 December 2009
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