Labor Department Issues New COBRA Subsidy Guidance

While a federal law authorizes COBRA health insurance premium subsidies to employees involuntarily terminated through December 31, some employees laid off before then may not be eligible for the subsidy, the Labor Department said.

The Labor Department has issued new guidance to end possible confusion.

The guidance says that in order for former employees to be eligible for the 65 percent federal nine-month COBRA premium subsidy—established under the American Recovery and Reinvestment Act of 2009—they must satisfy two conditions laid out in that law: They must have been involuntarily terminated from September 1, 2008, through December 31, 2009, and they must have been eligible to receive COBRA during that period.

It is that second condition—not widely understood among the general public—that could result in employees who are laid off this month not being eligible for the COBRA subsidy.

That could happen if employers allow laid-off employees to remain covered in the regular group health plan through the end of the month, a common practice.

As a result, those individuals would not be eligible for COBRA until January 1, 2010, thus missing the cutoff date for entitlement to the subsidy by one day.

“An individual who does not become eligible for COBRA until after December 31, 2009, does not meet the qualifications to be an assistance-eligible individual and would therefore be ineligible for the ARRA premium assistance,” the Labor Department said.

Filed by Jerry Geisel of Business Insurance, a sister publication of Workforce Management. To comment, e-mail editors@workforce.com.

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