March 01, 2010

COBRA Subsidy Program Eligibility Period Expires March 1, 2010

Last-minute Congressional efforts last week to extend the COBRA subsidy program eligibility period were unsuccessful. Accordingly, unless retroactive legislation is enacted to cover the gap (and the issue remains under active discussion on Capitol Hill), employees involuntarily terminated on March 1, 2010, and after will not qualify for a government-funded COBRA premium subsidy.

Previous legislation signed into law by President Obama on December 21, 2009, had extended eligibility for the program, which allows involuntarily terminated employees to purchase COBRA continuation coverage by paying only 35 percent of the otherwise required monthly premium, to employees involuntarily terminated through February 28, 2010 (the eligibility period was initially set to end on December 31, 2009).

Under the program, the employer is required to pay or absorb the remaining 65 percent of the cost and may then receive reimbursement through a credit on federal payroll taxes. The December 2009 legislation also extended the maximum subsidy period by an additional six months (from nine months to 15 months). This allowed employees involuntarily terminated during the period from September 1, 2008, through February 28, 2010, to receive subsidized COBRA coverage for up to 15 months.

We will provide further update information if the subsidy is renewed or extended.

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