The American Recovery and Reinvestment Act of 2009 (“ARRA”) created some additional COBRA continuation coverage rights for qualified beneficiaries when the qualified beneficiary’s loss of coverage was due to involuntary termination. Specifically, certain qualified beneficiaries are permitted a second opportunity to elect COBRA coverage, may receive a government subsidy towards the cost of coverage, and can elect (if permitted by the employer) different coverage than what was previously provided.
ARRA imposes notice requirements on employers to advise qualified beneficiaries of these rights. On March 19, 2009, the Department of Labor ("DOL") issued four model COBRA notices to employers: a general notice (which is available in full and abbreviated versions); an alternative notice for complying with notice requirements when the employer is subject to a state program of continuation coverage similar to COBRA; and a notice to deal with those individuals who are eligible to make a second chance election. Each notice comes in several parts, many of which will look familiar to employers. For purposes of this client alert, we will only discuss the general notice (in both forms) and the notice in connection with extended election period.
The general notice must be sent to all qualified beneficiaries who experienced a qualifying event at any time between September 1, 2008, through December 31, 2009. This will create headaches for employers because employers must notify individuals who are not eligible for the ARRA benefits of their existence. Inevitably, some participants will assume they are, in fact, eligible and request the benefit and employers will need to spend time explaining to the qualified beneficiary why he or she is ineligible.
The DOL has made some effort to reduce the amount of paperwork that the employer must send by creating an abbreviated version of the general notice. The abbreviated version is designed to be sent to individuals who experienced a qualifying event on or after September 1, 2008, but who have already elected COBRA coverage and still have it. These individuals are merely applying for the subsidized coverage, where eligible.
There is no specific timeframe in which these notices must be sent; however, the sixty (60) day period within which an assistance eligible individual may elect COBRA does not run until this general notice is received. Therefore, it is in an employer’s interest to get this out sooner rather than later.
The Notice in Connection with Extended Election Periods (or the second chance election notice) is designed to be provided to assistance eligible individuals (or any individual who would be an assistance eligible individual if a COBRA continuation election were in effect) who: (1) had a qualifying event at any time between September 1, 2008 and February 16, 2009; and (2) either did not elect coverage continuation or elected it but had subsequently discontinued COBRA. For a copy of these notices, click here.
The new notices also answer a question which clients had asked. Previously there had been debate that ineligibility for the subsidy terminated an individual’s ability to make a second chance election. The notices make clear that a participant who is not eligible for the ARRA subsidy is still be able to utilize the second chance election. The model notices and supporting regulations treat these two events as separate. Therefore, it appears that the exclusion from the subsidy will not automatically preclude an individual from make a second chance election.
Additionally, it is now clear that the grace period which ordinarily applies to COBRA payments (i.e., that an individual has thirty days from the due date within which to make the premium payment without losing coverage) will also apply to the 35% payment under the subsidy.
Employers must now distribute notices to all qualified beneficiaries who had a qualifying event between September 1, 2008, and December 31, 2009. For those who experienced an involuntary termination between September 1, 2008, and February 16, 2009, the DOL requires the information and the notice in connection with extended election periods be provided to such individuals by April 18, 2009. While there is no specific deadline for the general notice to all qualified beneficiaries, based upon the foregoing information unexpected results, the sooner the employer can provide this the better because it will start tolling the 60-day election period.
For additional information on this topic, please feel free to contact:
This client alert is one of a series designed to provide summaries of the American Recovery and Reinvestment Act of 2009 ("The Act") and information and guidance regarding opportunities and relief made available through The Act. All of The Act client alerts are available on Michael Best's Stimulus and Economic Recovery Team publications page. For additional information on this topic, please feel free to contact one of the authors of this alert or your Michael Best attorney.
If you are interested in learning about other provisions included in The Act, the Michael Best Stimulus and Economic Recovery Team is prepared to assist you in understanding the implications and in developing and implementing a strategy to secure the benefits of this unprecedented legislation. Specifically, we will assist you to identify opportunities, prepare appropriate proposals and make targeted contacts to secure funds. We will also work with you to ensure that your applications are tailored to meet your needs and that your funded projects proceed in compliance with award requirements and applicable laws.
If you are interested in learning about other provisions included in the Act, the Michael Best Stimulus and Economic Recovery Team is prepared to assist you in understanding the implications and in developing and implementing a strategy to secure the benefits of this unprecedented legislation. Specifically, we will assist you to identify opportunities, prepare appropriate proposals and make targeted contacts to secure funds. We will also work with you to ensure that your applications are tailored to meet your needs and that your funded projects proceed in compliance with award requirements and applicable laws.