DOL Issues COBRA Model Notices

HR Hero
March 24, 2009 | COMMENTS

Today, the U.S. Department of Labor (DOL) issued model COBRA continuation coverage notices that reflect the new nine-month, 65-percent subsidy on COBRA premiums. The notices are available online here.

There are four types of notices, each tailored to a particular employee, beneficiary, or situation. One model notice is tailored to former employees (and their beneficiaries) who had a COBRA-qualifying event between September 1, 2008, and February 16, 2009, and who either didn't elect COBRA coverage or did elect it but let it lapse. Those who lost their jobs involuntarily (along with beneficiaries) may be eligible for the subsidized COBRA coverage, and employers must give them notice of the possibility of subsidies by April 18.

The DOL says that each model notice “contains information to help satisfy the [American Recovery and Reinvestment Act of 2009's] notice provisions.” The general idea is to give notice of the subsidy's availability to everyone who has a qualifying event during the relevant time period (September 1, 2008, to December 31, 2009) so that everyone who may possibly qualify for the subsidy because of involuntary job loss knows about it.

The subsidy, created in the $787 billion economic stimulus package passed on February 17, applies to COBRA-covered employees whose employment was involuntarily terminated between September 1, 2008, and December 31, 2009, along with their qualified beneficiaries (spouses and children). These employees and beneficiaries receive a subsidy of 65% of what they would normally pay to continue health coverage under COBRA. The subsidy can be applied to any health coverage except health flexible spending account coverage offered through a cafeteria plan. Those who are entitled to the subsidy pay 35% of what they otherwise would have to pay for COBRA coverage. Employers pay the remaining 65% to the insurer or other coverage provider and then recover the subsidy from the federal government as a credit against their quarterly payroll taxes.

Starting February 17, employers became responsible for notifying employees of the possibility of COBRA subsidies. Employees and beneficiaries have 60 days from when they receive notice to decide whether to sign up for subsidized COBRA.

Additional new information on the COBRA subsidy (FAQs for employers and employees) can be found at www.dol.gov/COBRA.

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