Eligibility Period For COBRA Subsidy Extended to May 31, 2010

If you were wondering whether the COBRA subsidy obligation expired on March 31, 2010, Congress has rather belatedly decided that it hasn't.

As you may recall, the COBRA subsidy program was originally enacted on February 17, 2009.  The American Recovery and Reinvestment Act (ARRA), among other things, provided for a 65% subsidy of COBRA premiums for up to nine months for employees who were involuntarily terminated from employment between September 1, 2008 and December 31, 2009 (the "eligibility period").  Employers pay for the subsidy and then receive a credit against payroll taxes.

The ARRA eligibility period was due to expire on December 31, 2009, but the Fiscal Year 2010 Department of Defense Appropriations Act extended the eligibility period for the COBRA subsidy through February 28, 2010, and extended the subsidized COBRA coverage period to fifteen months. The Extension Act subsequently extended the eligibility period for the subsidy until March 31, 2010.

Belatedly, due to concerns about the $18 billion cost of its enactment, on the evening of April 15, 2010, Congress passed the Continuing Extension Act of 2010.  The President immediately signed the Act with a retroactive effective date of March 31, 2010, and a two-month extension of the period during which an involuntarily terminated employee may become eligible for the 65% subsidy for COBRA premiums.  The new extended eligibility period is slated to expire on May 31, 2010, but President Obama urged Congress "to move quickly to extend these benefits through the end of this year."  So, there may well be yet an additional extension of the eligibility period to December 31, 2010.  The period for receiving the subsidized COBRA coverage has not changed and remains at fifteen months.

The continuing Extension Act of 2010 mandates new election procedures for those who were involuntarily terminated after March 31, 2010 and new notice requirements for plan administrators.  The new Act also extends a number of other programs, such as unemployment insurance, until June 2, 2010 for those on unemployment who have exhausted their state-paid benefits.

Please let us know if you have any questions.