2009 Recovery Act - DOL Releases Model COBRA Subsidy Notice
March 20, 2009
The recently passed American Recovery and Reinvestment Act of 2009 required the Department of Labor (DOL) to issue model notices for employers to inform individuals of the new 65% government subsidy for COBRA premiums. Yesterday, the DOL posted these model notices on its website. There are several new notices, which sponsors of plans subject to Federal COBRA continuation coverage (e.g., the employer or another entity responsible for providing the standard COBRA election notice) must send to different groups of recipients, as follows:
General Subsidy Notice – This notice must be provided to all qualified beneficiaries (i.e., covered employees and their dependents) as follows:
- Full version – This notice provides information about the subsidy and includes information and election forms that serve the same purpose as the standard COBRA coverage election notice. It must be sent to all qualified beneficiaries, regardless of the type of qualifying event, if the qualifying event occurred between September 1, 2008 and December 31, 2009.
- Abbreviated version – This notice provides only information related to the subsidy. It may be sent in lieu of the full version to those individuals who had a qualifying event on or after September 1, 2008, have already elected COBRA coverage, and still have such coverage.
Although there is no specific deadline for providing this notice, it is advisable to distribute it as soon as possible to those individuals who fall in the applicable group of recipients and have already become eligible for COBRA.
Extended Election Notice – This notice must be provided to assistance eligible individuals (i.e., individuals who became eligible for COBRA due to an involuntary termination of employment after September 1, 2008) who were involuntarily terminated between September 1, 2008 and February 16, 2009 and either (i) had elected COBRA but are no longer covered, or (ii) were eligible to elect COBRA, but chose not to continue coverage. This notice must be provided no later than April 18, 2009.
Additionally, guidance issued by the DOL, IRS, and the Committee on Ways and Means, provides a non-exhaustive list of examples to explain the scope of the term "involuntary termination":
Involuntary termination is a termination that is at the direction of the employer.
- Layoffs (with or without plant shut down) are involuntary terminations of employment.
- Terminations due to misconduct are involuntary terminations of employment (however, if the termination is due to gross misconduct, COBRA coverage would not be provided to the individual and, consequently, COBRA subsidy will not be available).
Voluntary terminations include resignation, retirement and death.
Other types of terminations may qualify as "involuntary" depending on the facts and circumstances.