UPDATE: COBRA Subsidy Extension Still In Flux

Earlier this month we advised our clients and friends of the expiration of the COBRA subsidy, effective March 1, 2010, and the signing into law of a stopgap provision that extended the COBRA subsidy to qualified terminations through March 31, 2010. We've also generally advised holding your COBRA notices while Congress debates yet another extension of the subsidy through December 31, 2010.

Yesterday, the Senate voted with bi-partisan support to extend the COBRA subsidy to all qualifying terminations through December 31, 2010, as part of a broader jobs bill, H.R. 4213. The bill will now go to the House for consideration. The House could agree to the bill as is, reject it, or further amend it, sending it back to the Senate. While there is broad-based support for the COBRA subsidy among both parties in both houses of Congress, the legislative backlog--which includes the health care reform legislation--may delay progress on the bill.

We think the Department of Labor (DOL) is waiting for this legislation to pass before it comments on or otherwise implements new COBRA notices. DOL still has not publicly commented on the stopgap COBRA extension. But DOL's silence means that employers are left without government instructions for complying with the stopgap COBRA extension through March 31, 2010. In fact, the most popular FAQ on the DOL website continues to be "What is the current status of COBRA premium reductions under ARRA?" and from March 2, 2010 (when President Obama signed the stopgap bill) until now, the DOL answer to that FAQ has been wrong.

If you can continue to hold COBRA notices until the legislative picture becomes clearer, we still recommend a wait and see approach. As you know, employers must comply with COBRA's requirement to give notice to their plan administrators within 30 days of an employee termination (and the plan administrator--even if it's the employer--then has 14 days to send notice to qualified beneficiaries). Most employers still have plenty of time to send out whatever notice will be required by the law we expect to pass. If, however, you do not have the administrative resources to continue to wait or if we start bumping up against that 30-day period without greater clarity from Congress or DOL, we recommend issuing the current COBRA notice (which states that it is only available to qualifying terminations through February 28, 2010) with a cover letter explaining the following:

(1) President Obama recently signed a bill extending coverage under the COBRA subsidy program to involuntary terminations occurring between March 1, 2010 and March 31, 2010. As a result, you should substitute "March 31, 2010" for all references to "February 28, 2010" shown on the enclosed COBRA notice.

(2) Additionally, this new legislation also made the COBRA subsidy available to a new category of employees, those who first lost group health insurance coverage due to a reduction in hours and then suffered a termination from employment. If this new category applies to you, you may be eligible for the COBRA subsidy and are encouraged to apply.

We continue to recommend a holding pattern, provided that you can afford to hold notices without bumping up against the notice requirements while managing the extra attention to administrative detail. We continue to stay out in front of this developing law because we know our clients want to stay compliant, provide reliable information to terminated employees, and reduce the frustration and confusion associated with administering this program. Please stay in touch with your LMV attorneys and be alert to another Employment Law Advisory from us once the COBRA subsidy extension issue is clarified. If you have questions, please contact your LMV attorney at (205) 326-3002.