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Extension of COBRA Premium Subsidies

On December 19, 2009, the federal COBRA subsidy provisions included in the American Recovery and Reinvestment Act of 2009 ("ARRA") were amended by the Department of Defense Appropriations Act (the "DOD Act"). The DOD Act amended ARRA to increase the premium subsidy period from 9 months to 15 months, and to extend the eligibility period to February 28, 2010 (from December 31, 2009), so that individuals who experience an involuntary termination of employment between January 1, 2010 and February 28, 2010 may qualify for the subsidy. The DOD Act also clarifies that, to be eligible for the subsidy, individuals need not lose coverage (i.e., become eligible for COBRA coverage) by February 28, 2010, provided that their involuntary termination of employment occurs by that date.

The DOD Act includes additional notification requirements, and the U.S. Department of Labor (DOL) has issued updated model COBRA notices that may be used for compliance with these requirements. The notices are posted on the DOL website along with guidance regarding the timing of the notices and the changes made by the DOD Act. Importantly, certain of the notifications were to be provided by February 17, 2010. In addition, individuals who exhausted the 9-month subsidy period before it was extended to 15 months and who would be eligible for the extension made by the DOD Act must be notified of their right to pay the reduced premium for the additional 6 months (including for the retroactive period) within 60 days from the first day of the first period of coverage for which the subsidy would apply due to the extension (i.e., by January 29, 2010 for those individuals whose 9-month subsidy period expired on November 30, 2009).

Currently, a bill to extend the COBRA premium subsidy to individuals who experience an involuntary termination of employment between March 1, 2010 and December 31, 2010 is pending in Congress. It is likely that this bill will be enacted into law shortly. Further updated model COBRA notices will likely be issued by DOL following the bill's passage into law.

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