UBP blog

07/15/2009

Changes in COBRA Part 2–What Employers Need To Do

Filed under: ARRA Act COBRA Subsidy,COBRA — ubpblogger @ 8:49 am
Tags: ,

The new COBRA laws enacted in February will allow millions of Americans to keep their medical benefits, but they will also create an undeniable administrative burden for employers. Here’s a little background AND what has to happen for you to meet that burden and be sure that you’re in line with the new legislation.

On February 17th, 2009, President Obama signed the “American Recovery and Reinvestment Act (ARRA)” into law. “ARRA” provides a partial subsidy of COBRA and state mini-COBRA premiums to qualifying “assistance eligible individuals” (AEIs), their spouses, and their dependents. Premium assistance for these individuals began on or after the date the law went into effect and at this point lasts through December 31, 2009.

Once eligibility is determined according to the parameters of the law, here’s what employers need to DO to be in concert with the legislation.

What Employers Need to DO

COBRA subsidies became available starting March 1, 2009. The employer must take the following actions promptly, if they have not done so already.

1. Notices to re-enroll for current COBRA recipients:

Qualified beneficiaries who are currently on COBRA must make a new election to establish premium assistance under ARRA. You must send these individuals COBRA re-election notices with their new temporarily subsidized rates.

2. Extended election period for AEIs who didn’t initially elect COBRA:

The ARRA legislation applies to all assistance eligible individuals whose dates of involuntary termination extend back to September 1, 2008. These individuals who did not initially elect COBRA or who have allowed their COBRA coverage to lapse now have a special extended COBRA election period (beginning February 17, 2009 and ending 60 days after they receive an employer-provided notice). Thus the employer must track down all employees whose coverage has been terminated since September 1, 2008 and send them the newly required subsidy availability and election notice.

3. Finally, Emplouers must notify insurers of who is participating in the newly-subsidized COBRA coverage.

Please note that if you fail to provide timely notification (i.e. within 60 days of the Act becoming a law– by mid-April at the absolute latest) to all Assistance Eligible Individuals (AEIs), you are subject to standard COBRA penalties under ERISA (up to $110 per-day). You may also be subject to excise taxes of $100 per-day per-notice under the Internal Revenue Code.

Can your company afford not to send all assistance eligible individuals timely notification?

The Department of Labor has been directed to update notices within 30 days of ARRA enactment, which has obviously passed (March 17, 2009) at the absolute latest. However, if you handle your company’s COBRA in-house you were also required to have an updated general notice by March 17, 2009 to reflect the changes brought about by ARRA to the COBRA law. So there is NO time to waste on this.

Finally, keep in mind that this is not cast in stone, for instance, the deadline on the legislation is the end of 2009, but that may be extended, and your state may also have legislation changes that must be followed. In the case of Massachusetts, for instance, some changes are even more aggressive. Be sure to stay on top of these issues – whether you’re an employer OR an employee. It’s a responsibility that you dare not overlook.

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