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COBRA Subsidy FAQ

On February 17, 2009, President Obama signed into law the American Recovery and Reinvestment Act (ARRA), which includes several important changes to COBRA administration. We have listed here a few frequently asked questions/concerns that employers may have on this issue.

What is my responsibility as an employer?

Employers whose healthcare plans fall under federal COBRA law need to ensure that all employees who have been involuntarily terminated on or after September 1, 2008 are given the opportunity to enroll for COBRA under the new stimulus package. Additionally, any eligible employee who originally declined, waived, or terminated their COBRA continuation must be given a “second chance” to enroll in the coverage, effective March 1, 2009.

**Please note that if you are an MMC, Inc. client, MMC fully administers your benefit plans and will assume responsibility for notifying your former employees. As an MMC, Inc. client, you do not need to take any action.

How do I notify employees? What is the deadline for enrollment?

The U.S. Department of Labor has released a model letter that employers can utilize to notify employees under the ARRA.  Employees have a 60-day period from the date the notification is mailed to return COBRA election forms.

Who is eligible for the COBRA subsidy?

Only employees who were involuntarily terminated within the specified time frame (September 1, 2008 – December 31, 2009) are eligible. Eligibility will terminate if the employee becomes eligible for another group plan or Medicare, or if the employee exceeds the 9 month subsidy time period. Employees who voluntarily quit or were involuntarily terminated for gross misconduct are not eligible for the subsidy. Employees whose modified adjusted gross income exceeds $145K ($290K if filing jointly) are also ineligible for the subsidy.

What if I have employees who are enrolled in COBRA continuation due to a change in status (from full-time to part-time)?

Employees who are still actively employed, whether on a part-time or “per diem” status, are not eligible for the COBRA subsidy.

If my company doesn’t have enough employees to fall under federal COBRA legislation, what do I need to do?

Employers with fewer than 20 benefit eligible employees fall under Cal-COBRA legislation.  Under Cal-COBRA, the insurance carriers bear the responsibility for notifying former employees eligible for COBRA subsidies. If you are unsure of your COBRA status, we advise that you contact your benefit carrier.

 

 

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