Update Dec. 21, 2009: President signs bill including COBRA subsidy extension

In an unusual Saturday morning session on Dec. 19, the U.S. Senate voted 88-10 to pass legislation that would extend the original federal COBRA subsidy created by the American Recovery and Reinvestment Act of 2009 (ARRA), which President Barack Obama signed into law in February.

Under the ARRA, the federal government pays 65% of COBRA premiums for up to nine months for employees who were involuntarily terminated between September 1, 2008, and December 31, 2009. This subsidy was set to expire at the end of this year and has already started to end for individuals who have been receiving it since March.

The legislation passed by the Senate was part of the Department of Defense Appropriations Act, 2010 (H.R. 3326), a bill that appropriates funds for the Department of Defense. The bill passed the U.S. House of Representatives by a 395-34 vote earlier in the week. The legislation would extend:

• the total allowable time an individual could receive the COBRA subsidy by six months (from nine to 15 months); and
• the subsidy to individuals who are involuntarily terminated between January 1, 2010, and February 28, 2010.

Additionally, the legislation would allow individuals whose subsidy periods already expired and who failed to pay their full unsubsidized premiums to retroactively pay them.

The legislation would also require employers to provide notice to all individuals who are COBRA beneficiaries on or after October 31, 2009 and all individuals whose employment is terminated on or after October 31, 2009. The notice must describe the new 15-month premium subsidy created by the legislation.

The legislation will now go to the President to sign into law.

The House also recently passed a major appropriations bill with a provision that would extend the COBRA premium subsidy to individuals who are involuntarily terminated through June 30, 2010. However, the Senate is not expected to act on this legislation until next year.

Want to learn more? Tune in to the HR Hero audio event New COBRA Subsidy Extension: Step-by-Step Guidance for Employers presented by Ashley Gillihan, an attorney who advises employers on health and welfare employee benefit compliance, on January 20 and February 4. For more information, call (800) 274-6774.

Also, you can keep up with the latest legal changes affecting employer benefits and trends in employee benefits with the Benefits and Compensation Law Alert and Benefits and Compensation Law for Nonprofits.