The American Recovery and Reinvestment Act of 2009 (ARRA), has been signed into law by President Obama. ARRA creates a federal subsidy of the premiums payable by certain terminated employees for continuation of coverage under employer-sponsored group health plans pursuant to the requirements of the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA). What does this really mean for employers?
It means employers, go back to September 1, 2008. Under ARRA, employers have an obligation to inform employees who experience an involuntary termination of employment (but not for reasons of gross misconduct) from September 1, 2008, to December 31, 2009, that they automatically qualify for a 65% subsidy for COBRA premiums for up to nine months after their date of termination or layoff. So, employers get your ARRA notices ready. Employers have an affirmative obligation to identify every employee who has been laid off since September 1, 2008, and send them an ARRA notice.
Below are some of the points your ARRA notice should include:
- A description of the former employee’s automatic qualification for the subsidy, subject to the employee ability to meet the subsidy’s income requirements.
- The forms necessary for establishing eligibility for the subsidy.
- Pertinent contact information for the COBRA plan administrator or anyone else who can assist former employees with access to the subsidy.
Although it may not seem like much, there is a small burden placed upon employees who qualify for the subsidy. Covered individuals who become eligible for coverage under another group health plan or become eligible for Medicare coverage before the expiration of the nine month period must notify the health plan providing COBRA in writing or face a 110% penalty of the subsidy received. Make sure you add that point to your ARRA notice.