An additional 10-month COBRA premium subsidy extension was proposed by President Barack Obama in his budget for fiscal year 2011. If enacted into law, beginning (or retroactive to) March 1, 2010, the federal government would continue to reimburse employers or health plans to subsidize 65 percent of the premium for workers who lose their jobs. Under the proposed extension, the subsidy would be available to workers laid off between March 1 and year end 2010. The subsidy would be provided for a period of up to 12 months.
The COBRA subsidy program was originally passed by Congress in February 2009. Under a program extension enacted in December 2009, workers who lose their jobs from Sept. 1, 2008 through Feb. 28, 2010 receive the subsidy for up to 15 months.
As under the current program, only laid-off workers who could not get coverage under another group health plan, like a spouse’s plan or Medicare, would be eligible for the subsidy. The premium assistance would be available for individuals whose income is under $145,000 and for families filing jointly with incomes under $290,000. The subsidy phases out for those earning more than $125,000 (or $250,000 for families).
"Part of the confusion for benefit administrators and employees is that, as originally passed, the subsidy was provided for a period up to nine months. In December 2009, the period was extended to a total of 15 months, and under the latest proposal it would be 12 months," says Karen Frost, health and productivity solutions leaders at Hewitt Associates in Chicago. "That's three different time frames and three different provisions."
As a result, she explains, "workers who become unemployed on Feb 28 are entitled to the subsidy for 15 months. But if they are laid off on March 1st, they only receive the subsidy for 12 months."
Get Prepared Now
If the extension is passed, and Frost believes it's "very likely" it will be—given its support by the President and in Congress—"HR and benefits administrators will have to go through another effort to get people knowledgeable on the extension," and the DOL will have to issue new notices.
"The quicker we can get action from the administration and the Congress, the better it will be for employers and administrators, and for the individuals who are affected," she notes. Otherwise, some subsidy payments will have to be made retroactively, as was done with the original COBRA premium subsidy and the first extension.
"The best insight I can give to HR is to start talking now to your COBRA administrator about how to handle this potential extension," Frost advises. "If the extension hasn't been passed by March 1, some employers may want to proceed assuming that the extension is going to happen. They'll have the least amount to deal with retroactivity because they'll be ahead of the game, but they do take a bit of a risk that the subsidy doesn't get extended. The other option is to make sure that your COBRA administrator is planning for the extension and can hit the ground running as soon as it is enacted."
Adjusting to the original subsidy was the hardest part, says Frost. "For the first extension, we just had to modify what we were already doing in terms of the subsidy. And the efforts around a second extension would be very similar. It's a modification; it's not a brand new game."
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Congress May Extend COBRA Subsidy Using Emergency Spending
With current extensions of the COBRA subsidy and unemployment benefits set to expire at the end of February and the jobless rate still near 10 percent, Democratic lawmakers want to pass further extensions quickly, without having to find offsets for the costs, reports The Hill.
Democratic leaders said extensions of these benefits should be emergency spending that isn’t subject to the pay-as-you-go statute, which requires new non-discretionary spending to be offset with spending cuts or tax increases. “Assistance to unemployed workers during periods of high unemployment are always classified as emergencies,” a House Democratic leadership aide told The Hill. |
Stephen Miller is an online editor/manager for SHRM.
Related Articles:
Treasury Attorney Explains COBRA Subsidy Extension Notices, SHRM Online Legal Issues, January 2010
COBRA Subsidy Extension, Notice Requirement Changes Reviewed, SHRM Online Legal Issues, January 2010
Model COBRA Subsidy Extension Notices Now Available, SHRM Online Benefits Discipline, January 2010
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