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COBRA Subsidy Extended to May 31, 2010

April 2010

On April 15, 2010, President Obama signed into law an $18 billion measure that is intended to provide further federal assistance for workers who have been involuntarily terminated. The Continuing Extension Act of 2010 not only extends the COBRA subsidy to employees involuntarily terminated on or before May 31, 2010, but also extends other federal programs that provide benefits to unemployed individuals. This most recent enactment is the third extension of the COBRA subsidy since January 1, 2010.

The Continuing Extension Act was precipitated by the fact that (a) as of April 5, 2010, thousands of individuals unemployed for more than 26 weeks had become ineligible for unemployment compensation benefits due to the expiration of certain federal programs; and (b) individuals recently laid off were ineligible for the COBRA subsidy. Specifically, prior to the passage of the Continuing Extension Act, employees terminated after March 31, 2010, were ineligible for the 65% COBRA subsidy provided under the American Recovery and Reinvestment Act. The new law extends the eligibility for the COBRA subsidy to individuals, and their qualified beneficiaries, terminated on or before May 31, 2010. Furthermore, the Continuing Extension Act is retroactive in its application, so employees who were involuntarily terminated after March 31, 2010, and their qualified dependents, are now eligible for the 65% COBRA subsidy. Additionally, the Continuing Extension Act effectively extends certain other federally funded programs providing unemployment benefits to individuals who remain out of work. Thus, individuals whose unemployment benefits expired on April 5, 2010, have been retroactively reinstated into such federal programs.

The slew of recent legislation providing short extensions to the COBRA subsidy is the federal government’s attempt to provide an interim solution to unemployed individuals until Congress can pass the American Workers, State, and Business Relief Act of 2010, which, if passed, would extend the COBRA subsidy to terminated employees (and their qualified dependents) through December 31, 2010. Progress on this legislation, which is more comprehensive than the recent interim laws, has been halted by bipartisan debate on certain tax credits contained in the bill.

As a consequence of this new legislation, employers must (a) send out revised COBRA notices to any employee (and their qualified dependents) terminated after March 31, 2010, and (b) provide any individual (and their qualified dependents) involuntarily terminated on or before May 31, 2010, with the appropriate COBRA notices as prescribed by law. Form notices are available through the U.S. Department of Labor’s website at: http://www.dol.gov/ebsa/COBRAmodelnotice.html.

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For more information, please contact:
Catherine P. Wells ¦ Member of the Firm ¦ (973) 530-2051 ¦ Email cwells@wolffsamson.com
Margaret O'Rourke Wood ¦ Member of the Firm ¦ (973) 530-2063 ¦ Email mwood@wolffsamson.com
Denise J. Pipersburgh ¦ Associate ¦ (973) 530-2090 ¦ Email dpipersburgh@wolffsamson.com