UPDATE - COBRA Subsidy: Extension Through May 31, 2010

The following EBG client should be of interest to all Florida employers

By Joan A. Disler, Gretchen Harders, and Ray Kaplan

Background

As we reported in our Client Alert of December 24, 2009 ("UPDATE: Cobra Subsidy: What it Means for Employers Now"), President Obama signed into law the Department of Defense Appropriations Act, 2010 (the "Defense Appropriations Act"), which, among other things, extended and expanded certain provisions of the American Recovery and Reinvestment Act of 2009 ("ARRA") pertaining to premium assistance for benefits under the Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA"). The Defense Appropriations Act extended the COBRA premium subsidy for assistance-eligible individuals who became eligible for COBRA from the period that began September 1, 2008, and ended on December 31, 2009, to the period that ended on February 28, 2010.

As we also reported in our Client Alert of March 8, 2010 ("UPDATE – COBRA Subsidy: New Extension Through March 31, 2010"), President Obama signed into law the Temporary Extension Act of 2010 (the "Temporary Extension Act"). The Temporary Extension Act extended the 15-month COBRA premium subsidy for eligible individuals who were involuntarily terminated from employment through March 31, 2010. The Temporary Extension Act also expanded the application of the premium subsidy to individuals who had a reduction of hours of employment (occurring from September 1, 2008, through March 31, 2010), followed by an involuntary termination that occurred on or after March 2, 2010, and before April 1, 2010.

COBRA Subsidy Extension

On April 15, 2010, President Obama signed into law the Continuing Extension Act of 2010 (the "Continuing Extension Act"). The Continuing Extension Act extends the 15-month COBRA premium subsidy program for eligible individuals who were involuntarily terminated from employment through May 31, 2010. This extension also applies to individuals who had a reduction of hours of employment (occurring from September 1, 2008, through May 31, 2010) followed by an involuntarily termination that occurs on or after March 2, 2010, and before June 1, 2010. Under the Continuing Extension Act, group health plans and their administrators will need to provide eligible individuals who were involuntarily terminated on or after April 1, 2010, and prior to April 15, 2010, with revised COBRA notices and election forms. It would appear that these revised COBRA notices and election forms must be provided no later than sixty (60) days from the date of enactment (which appears to be June 14, 2010), and those individuals will have an additional sixty (60) days to make an election.

The Department of Labor Employee Benefits Security Administration has updated the introduction on its COBRA Web page (www.dol.gov/ebsa/COBRA.html) to reflect the Continuing Extension Act and presumably is in the process of updating the fact sheet, frequently asked questions and other materials.


 

UPDATE - COBRA Subsidy: New Extension Through March 31, 2010

The following EBG client alert should be of interest to all Florida employers. 

By Joan A. Disler, Michelle Capezza, and Jason M. Rothschild

As we reported in our Client Alert of December 24, 2009 ("UPDATE: COBRA Subsidy: What It Means for Employers Now"), President Obama signed into law the Department of Defense Appropriations Act, 2010 (the "Defense Appropriations Act"), which, among other things, extended and expanded certain provisions of the American Recovery and Reinvestment Act of 2009 ("ARRA") pertaining to premium assistance for benefits under the Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA"). The Defense Appropriations Act extended the COBRA premium subsidy program for assistance-eligible individuals who became eligible for COBRA from the period that began September 1, 2008, and ended on December 31, 2009, to the period that ended on February 28, 2010.

On March 2, 2010, President Obama signed into law the Temporary Extension Act of 2010 (the "Act"). The Act extends the 15-month COBRA premium subsidy program for an additional 31 days. Thus, this extension will provide the COBRA premium subsidy for eligible individuals who are involuntarily terminated from employment through March 31, 2010. Congress is currently considering another bill, H.R. 4213, the Tax Extenders Act of 2009, which would extend the COBRA premium subsidy program through the end of 2010.

The Act also expands the application of the premium subsidy to individuals who had a reduction of hours of employment (occurring from September 1, 2008, through March 31, 2010), followed by an involuntary termination that occurs on or after March 2, 2010 and before April 1, 2010. These individuals are eligible for the premium subsidy on a prospective basis, whether or not they made an election of COBRA coverage on the basis of the reduction of hours of employment. In such cases, the involuntary termination of employment is treated as the qualifying event for purposes of obtaining the subsidy. However, pursuant to the Act, the maximum duration of the COBRA period is determined as if the qualifying event were the reduction of hours of employment. Any of these individuals who have these new election rights are not required to make payments for any continuation coverage between the reduction of hours and the involuntary termination of employment. It is not clear whether the intent of the legislation is also to allow an eligible individual to elect retroactive (unsubsidized) coverage as of the date of the reduction of hours of employment. Administrators of group health plans will now have additional notice requirements with respect to individuals who are COBRA assistance-eligible under this new rule.

The Act also includes clarification regarding an employer's determination as to whether an employee's termination was involuntary. The Act provides that, for purposes of the COBRA subsidy rules, a termination of employment shall be deemed to be an involuntary termination, provided that (i) the employer determines that such termination is an involuntary termination based on a reasonable interpretation of ARRA and the administrative guidance thereunder, and (ii) the employer maintains supporting documentation of the determination, including an attestation by the employer of involuntary termination.

The Department of Labor Employee Benefits Security Administration has updated the introduction on its COBRA Web page to reflect the Act and is in the process of updating the fact sheet, frequently asked questions and other materials on the COBRA Web page. Additional guidance is anticipated
 

UPDATE - COBRA Subsidy: DOL Issues Updated Model COBRA Notices and Other Guidance

The following EBG Client Alert should be of interest to all Florida employers

by Joan A. Disler and Ray Kaplan

As we advised you in our Client Alert that was issued on December 24, 2009 ("UPDATE: Cobra Subsidy: What it Means for Employers Now"), President Obama signed into law the Department of Defense Appropriations Act of 2010 (the "Act"), which, among other things, extended and expanded certain provisions of the American Recovery and Reinvestment Act of 2009 ("ARRA") pertaining to premium assistance for benefits under the Consolidated Budget Reconciliation Act of 1985 ("COBRA"). The Department of Labor ("DOL") has issued the following updated information, of which we wanted to make you aware:

Does Florida Law Require Vacation Pay?

For private sector employers, the short answer is no. That's why, in a Miami Herald article I was quoted in this morning, I said there's no compelling legal reason to tell employees to take vacation.  I added that there are practical reasons for advising employees to take vacation -- so that they can recharge their batteries, avoid getting burned out, etc.  But from a legal perspective, if an employee declines to take her annual vacation, or is forced to forego a vacation because of a heavy workload, that should not present a legal problem for a Florida employer, absent discriminatory treatment, or a contract or collective bargaining agreement that mandates vacation time.  Florida law does not require employers in the private sector to offer vacations (though, of course, most employers do), to pay out unused vacation time at the end of the year or upon termination, or to carry over unused vacation time to subsequent years.  Employers are free to adopt policies on these issues that meet their business needs.  And the policies themselves should not be legally binding on the employer if they are merely contained in an employee handbook which contains the appropriate disclaimer that it is not a contract of employment. 

All that said, Florida employers would be foolish to eliminate vacations as a matter of policy, even if workers in the current economic climate might accept such hardships.  The job market will improve, and employees have long memories. 

COBRA Subsidy: What It Means For Employers

The following is a reprint of a client alert authored by EBG employee benefits attorneys Joan Disler and Ray Kaplan. It should be of interest to all Florida employers.

COBRA Subsidy: What It Means For Employers

On February 17, 2009, President Obama signed into law the American Recovery and Reinvestment Act of 2009 (H.R. 1, S. 1) (the "Act"), which, among other things, amends the Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA").

The Act provides:

  • for a government subsidy of up to 65 percent of the COBRA premiums (including state "mini-COBRA" coverage) to certain eligible individuals (known as "assistance eligible individuals");
  • that the COBRA subsidy applies only to individuals who are eligible for COBRA due to an involuntary termination from employment from September 1, 2008, through December 31, 2009; and
  • that the COBRA subsidy applies for a maximum of nine (9) months of coverage (beginning on March 1, 2009).

The Act does not extend the otherwise applicable COBRA coverage period, nor does it adopt the proposal in the House bill to continue coverage through Medicare eligibility.

Employers should expect that these provisions will result in more COBRA-qualified former employees electing coverage under employer plans. Employers also should expect increased administration, since the Act imposes notice requirements (and potential penalties for non-compliance) and has administrative implications for almost all employers that require actions to be taken in March/April 2009. A general overview is provided below.

Eligibility

An individual is eligible for the COBRA premium subsidy if he or she:

  • is involuntarily terminated between September 1, 2008, and December 31, 2009;
  • elects COBRA coverage (when first offered or during the Special Election Period described below); and
  • has modified adjusted gross income not exceeding $145,000 per year ($290,000 for couples filing jointly) – the subsidy is phased out starting at modified adjusted gross income of $125,000 ($250,000 for couples filing jointly).

Special Election Period

Any eligible individual who became eligible for COBRA coverage on or after September 1, 2008, but did not elect to receive COBRA coverage, is eligible for the COBRA premium subsidy and must be given a second chance to elect COBRA coverage.

COBRA Subsidy

The government subsidy is not paid to the individual electing COBRA coverage. Rather, eligible individuals (or anyone else on behalf of the individual other than the individual’s employer) are to pay 35 percent of the required COBRA premium. The entity that provides the coverage and collects the individuals’ premiums must cover the remaining COBRA premium (i.e., 65 percent). That entity thereafter will receive reimbursement through a payroll tax credit, as follows:

  • if the group health plan is a multi-employer plan, the plan will be entitled to reimbursement;
  • if the group health plan is not a multi-employer plan and some or all of the coverage is not provided by insurance, the employer will be entitled to reimbursement; or
  • if the group health plan is not a multi-employer plan and all of the coverage is provided by insurance, the insurer will be entitled to reimbursement.
     

The COBRA subsidy ends on the earliest of

  • the date the individual becomes eligible for health coverage under another group health plan or Medicare;
  • nine (9) months after the first day of the first month to which the COBRA subsidy applies; or
  • the end of the maximum COBRA coverage period required by law.
     

Many employers currently provide a COBRA subsidy to employees who are involuntarily terminated pursuant to the terms of their severance plans or individual agreements. Given that the Act requires the individual to pay 35 percent of the premium for the reimbursement to be claimed, it is not clear whether the reimbursement is available if the eligible individual pays less than 35 percent of the premium.

Notice Requirements

On or before April 18, 2009, employers must provide notice advising of the availability of the COBRA premium subsidy to:

  • all individuals who became entitled to elect COBRA coverage during the period beginning on September 1, 2008, and ending on the day before enactment (February 16, 2009); and
  • any individual who became eligible for the Special Election Period described above.
     

All individuals who have a COBRA qualifying event between February 17, 2009, and December 31, 2009, must receive an updated COBRA notice (or the inclusion of a separate document with the COBRA notice) reflecting the availability of the COBRA premium subsidy. This must be provided within the usual COBRA notice deadline (generally 44 days after the qualifying event).

The Department of Labor is required to provide model notices no later than March 19, 2009.

The Act also provides that employers may allow (but are not required to allow) an individual eligible for the COBRA premium subsidy to elect a different COBRA coverage option from the one the eligible individual originally elected at the time of termination from employment. If offered, however, the other option cannot be more expensive than the option which the individual originally elected and must be an option offered to active employees.

Action Items

The COBRA provisions in the Act are effective for most employer-sponsored health plans beginning March 1, 2009. Accordingly, employers should immediately begin to:

  • Revise and update COBRA communication materials.
  • Provide written notice as required by the Act to individuals who are eligible for the subsidy by April 18, 2009.
  • Identify individuals entitled to the special enrollment period and provide notice allowing them to elect to receive the COBRA coverage and the premium subsidy.
    Implement administrative procedures to provide the subsidy (as applicable) and obtain the payroll tax credit.
  • Decide whether to allow eligible individuals to change their health plan options.
  • Develop procedures to reinstate the 100 percent COBRA premium charge if the individual continues to be eligible for COBRA coverage after termination of the subsidy.
  • Review severance plans and other agreements that provide an employer paid COBRA subsidy in light of the new government subsidy.