COBRA Subsidy Ends as of May 31, 2010

Last Updated: June 7, 2010

The COBRA subsidy, which affords Assistance Eligible Individuals (AEIs) the opportunity to pay only 35% of their COBRA premiums for up to 15 months, was not extended by Congress before its Memorial Day recess. For many employers, this came as quite a surprise. Up until late Friday night, it appeared that Congress was going to extend the subsidy for employees and dependents whose COBRA qualifying event took place through November 30, 2010. While not impacting individuals already receiving the subsidy, as things stand now, no one can become subsidy eligible after May 31, 2010.

As you may know from our earlier emails, this subsidy applied to employees and dependents whose COBRA qualifying event was either the employee’s involuntary termination that occurred between September 1, 2008 and May 31, 2010; or was the employee’s reduction in hours between September 1, 2008 that was followed by the employee’s involuntary termination between March 2, 2010 and May 31, 2010.

As this legislation has been subject to a number of extensions, most of which were retroactive in nature, we remain unsure of the subsidy’s future. We understand that Congress plans to reconsider extending the subsidy when it reconvenes on June 7, 2010. In the meantime, employers should continue to administer the subsidy for individuals who qualified prior to the May 31, 2010 sunset date. For individuals who terminated on or after June 1, 2010, COBRA notices should not contain language about the subsidy’s availability. If the subsidy is extended and made retroactive, those individuals will receive an updated COBRA notice.

If your company terminated an employee on June 1 with the anticipation of the subsidy still being in place, we urge you to give us a call. We have been in contact with the federal Department of Labor and can share the information we have learned from them.

For background about the subsidy, please see our previous article COBRA Subsidy and Unemployment Benefits Extended by the CEA

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