The ARRA COBRA Subsidy: Operative Dates

June 9, 2009

September 1, 2008

To be eligible for the subsidy, an employee must be involuntarily terminated between September 1, 2008 and December 31, 2009. An employee involuntarily terminated before September 1, 2008, is not eligible for the subsidy, even if the employee’s COBRA coverage did not start until after September 1.

Example

An employee was laid off on June 15, 2008, but received severance pay, including health insurance benefits, through December 31, 2008. The employee is not eligible for the subsidy in March 2009. It is the date of involuntary termination that controls–in this case June 15, 2008.

February 17, 2009

This is the date the ARRA became law. Persons eligible for COBRA after September 1, 2008 and prior to February 17, 2008, who do not have it (even if they had it and dropped it), may elect COBRA during an extended enrollment period.

March 1, 2009

The first day of subsidy for most persons who had COBRA continuation coverage in effect on February 17, 2009.

December 31, 2009

This is the last day that an employee can be involuntarily terminated and still be eligible for the COBRA subsidy, unless the subsidy is extended by Congress.

September 30, 2010

The COBRA subsidy runs for nine months only, unless Congress extends the period of subsidy. Consequently, an employee who was involuntarily terminated on December 31, 2009 would be eligible for the COBRA subsidy through September 30, 2010.

Example

On December 15, 2009, an employee is involuntarily terminated and elects COBRA coverage that day. She will receive the subsidy for 9 months, until the earlier of August 15, 2010, or until she becomes eligible for other group health plan coverage or Medicare.

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12 Responses to “The ARRA COBRA Subsidy: Operative Dates”

  1. Amy Says:

    Are labor unions who provide the current year medical coverage based on the # of hrs a member has worked in the prior year required to provide the 65% subsidy based on ARRA? For example my fiance works for NY Local 46 as a reinforcing iron-worker. Due to layoffs, he has only worked 430 hrs this year. He needs 900 hrs for his coverage to continue next year. They told him that he can get Cobra for next year @ $537 a month. Shouldn’t the ARRA subsidy apply?

    Any info will be greatly appreciated.

    • Ken Says:

      The requirement for the subsidy is that the employee must be involuntarily terminated during the relevant period, i.e., prior to 12/31/09. Since your fiance appears to be eligible for COBRA continuation coverage, the next question is whether the layoff constitutes involuntary termination. The construction trades are somewhat unique in that men and women are frequently laid off and then recalled, in contrast to industrial settings where layoffs are often permanent.

      I cannot ethically provide you legal advice since absent numerous formalities. However, it appears on the surface that your fiance may be eligible for the subsidy. I suggest you call the U.S. Department of Labor in DC and ask for their read on the matter.

  2. Amy Says:

    Thank you for your prompt response. I agree, construction is unique. However, the way his union works, even if he gets rehired a few times, there is no way he will be able to work enough to get the required 470 hrs he needs by the end of the year in order to be covered for 2010. Hrs accumulated don’t roll into the next year. I will check with the dept. of labor.

    Thanks.

  3. Amit Says:

    I am laid off effective 11/14/09 and chose COBRA. I will receive 4 weeks of severance pay to be paid on Dec 4,2009. Am I eligible for COBRA subsidy for 9 months?

    • Ken Says:

      You should be eligible for the subsidy for nine months from the date you lose group health insurance coverage. Your employer should advise you of your benefit under the ARRA. I recommend that you call your local office of the U.S. Department of Labor if you have any need for additional clarification on your rights under the statute. There is also some possibility that Congress will extend the subsidy beyond 2009, though Congress has not acted on that matter yet.

  4. Marot Weiss Says:

    May I ask… if termination were to occur Dec 4th, but then employer’s group healthcare plan covers terminated employee through Dec 31st, is employee still eligible? In other words, is it based on term date, in this case, or on end of coverage date?

  5. Marot Weiss Says:

    Found this unfortunate commentary on the web:

    The COBRA ARRA 65% assistance payment only applies to individuals who both experience an involuntary termination of employment and whose eligibility for COBRA occurs on or before December 31, 2009. This approach, which is outlined in Q&A 13 of Notice 2009-27, creates a significant year-end problem for many employers and COBRA administrators.

    This problem is rooted in the common administrative practice of continuing active employee medical coverage through the end of the month in which a termination of employment occurs and starting COBRA coverage the first day of the subsequent month. This practice, which is rooted in administrative ease, uniform COBRA start dates, and premium payment practices for active employees will mean that any such employee who suffers an involuntary termination of employment in December of 2009 will not be entitled to the ARRA 65% assistance payment–because COBRA coverage will not start until January 1 of 2010.

    While such an individual clearly suffers an involuntary termination of employment during 2009, COBRA coverage starts one day too late and, under the terms of ARRA, will result in not being eligible for the 65% assistance payment.

    Absent additional guidance from the IRS (or an extension of the ARRA rules by Congress), employers should consider changing their plan rules, employee communication material, and administrative practices to start COBRA coverage on the last day of the month of an involuntary termination of employment instead of the first day of the following month.

  6. Marot Weiss Says:

    Alright, when is it likely we’ll have a bill in effect to extend ARRA subsidization for Cobra? Do you think it’ll be well into the new year, so people getting terminated Jan 1st, will have to float the bill for full Cobra payments for a while?

    • Ken Says:

      The good news is that Congress just passed and the President signed an extension through February 28 for eligibility to commence and the total period of coverage is now 15 months. Those who paid the full premium in December are entitled to a credit or a refund.

  7. Janice Says:

    I really don’t understand all this but would I benefit from being laid off on Dec 31st or Jan 1st? My employer was going to let us go Jan 1st but then said we would benefit from Dec 31st instead.

    • Ken Says:

      You were better off being laid off December 31 until last week. However, the Congress approved a two month extension of the COBRA subsidy benefit date through February 28, 2010. They also approved running the COBRA subsidy for an additional six months, a total of 15 months.

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