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November 5, 2009

COBRA Subsidy Extensions Proposed

At least two bills have recently been introduced in Congress that would extend the COBRA subsidy period:

  • H.R. 3966, introduced on 10/29/09, would extend the COBRA subsidy eligibility period from 9 to 15 months.
  • H.R. 3930, introduced on 10/26/09, proposes the following:
    • Extends the COBRA subsidy period from 9 months to 15 months;
    • Individuals involuntarily terminated through June 30, 2010 could qualify for the subsidy; and
    • Extends COBRA continuation coverage from 18 to 24 months, in certain circumstances.

At this time, these bills are just legislative proposals; they have not become law.  In the absence of a COBRA subsidy extension, individuals whose COBRA subsidy began on March 1, 2009 will exhaust their right to the COBRA subsidy on November 30, 2009.  Plan administrators should make certain that it has been made clear, to affected individuals, that their COBRA rate will increase to the full statutory amount upon expiration of the subsidy.  While there is not a specific requirement to provide a notice to affected individuals, it would be a prudent practice to give individuals a ‘heads-up”.  A simple letter, such as:

“Effective [date], your entitlement to the COBRA subsidy will end.  Your right to COBRA will continue until [date], as long as you pay the full COBRA rate, which will be $                        , beginning [date].  If you have questions or need additional information, please contact [name and contact information].” 

 

The information contained in this Benefit Beat is not intended to be legal, accounting, or other professional advice, nor are these comments directed to specific situations.

As required by U.S. Treasury rules, we inform you that, unless expressly stated otherwise, any U.S. federal tax advice contained in this Benefit Beat is not intended or written to be used, and cannot be used, by any person for the purpose of avoiding any penalties that may be imposed by the Internal Revenue Service

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