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As described in our earlier alert of February 18, 2009, the American Recovery and Reinvestment Act of 2009 (Act) establishes a new COBRA subsidy for qualified COBRA beneficiaries who involuntarily lose their jobs between September 1, 2008 and December 31, 2009 and provides a second special election opportunity for individuals who lost group health plan coverage due to an involuntary termination between September 1, 2008 and February 16, 2009 to elect continuation coverage.  The Act also requires employers and group health plans to provide notice of the availability of the COBRA subsidy and special election periods for COBRA continuation coverage.

To assist employers and group health plans to comply with these new notice obligations, the Act required the Department of Labor (DOL), in consultation with the Secretaries of Treasury and Health and Human Services, to develop model notices.  On March 19, 2009, the DOL issued four different model notices for use by employers and group health plans in satisfying the Act’s notice obligations.  Each notice is tailored to a specific situation and a brief overview is as follows:

• General Notice.  This so-called “full notice” combines information on the new COBRA subsidy program with information already required in the pre-existing COBRA model notice.  Group health plans subject to the federal COBRA provisions must send the full notice to all qualified COBRA beneficiaries, not just covered employees, who experience any qualifying event at any time from September 1, 2008 through December 31, 2009.
  
  
• Abbreviated General Notice.  This notice includes the same information as the “full notice” regarding the availability of the COBRA subsidy and other rights under the Act but does not include the regular COBRA coverage election information.  Group health plans may send this abbreviated notice (in lieu of the “full notice”) to individuals who: (i) experienced a qualifying event during, on or after September 1, 2008; (ii) have already elected COBRA coverage; and (iii) still have COBRA coverage.  
  
  
• Alternative Notice.  This notice must be sent by insurance companies to persons who became eligible for continuation coverage under state “mini-COBRA” laws. 
  
  
• Notice In Connection With Extended Election Periods.  Group health plans subject to the federal COBRA provisions must send this notice to any “assistance eligible individual” (or any individual who would be an assistance eligible individual if a COBRA continuation election were in effect) who: (i) had a qualifying event at any time from September 1, 2008 through February 16, 2009; and (ii) either did not elect COBRA continuation coverage, or who elected it but subsequently discontinued COBRA.  Generally, an “assistance eligible individual” is an individual who is eligible for COBRA continuation coverage as a result of an involuntary termination of employment at any time from September 1, 2008 through December 31, 2009, and who elects COBRA coverage.  This notice includes information on the Act’s additional election opportunity, as well as COBRA subsidy information.  Importantly, this notice must be sent by April 18, 2009.

The model notices are available online at the DOL’s website http://www.dol.gov/ebsa/COBRAmodelnotice.html.

In addition, the DOL recently has published new FAQs for employers clarifying numerous aspects of the COBRA subsidy program, which are available at http://www.dol.gov/ebsa/faqs/faq-cobra-premiumreductionER.html.  Notably absent from this guidance is any clarification as to what constitutes an “involuntary termination” for purposes of the Act.  The Treasury Department, however, has indicated that it will issue guidance on the meaning of “involuntary termination” soon.  Further, the Internal Revenue Service has posted information on its website at http://www.irs.gov/newsroom/article/0,,id=204505,00.html explaining how employers should implement, and seek reimbursement of, the COBRA subsidy. 

If you have any questions regarding the new COBRA model notices, or need assistance in tailoring any of these notices to your group health plan, please feel free to contact a member of Greenebaum’s Employee Benefits Team. 

Even though the content of the above Greenebaum Doll & McDonald e-bulletin is primarily informative, state and federal law obligates us to inform you that this is an advertisement. You have received this advisory because you are a client or friend of the firm.

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