COBRA Provisions in the

American Recovery and

Reinvestment Act of 2009

Compliance Assistance

Webcast

EBSA

Employee Benefits Security Administration

U.S. Department of Labor

Overview

QBs can pay a reduced premium of 35%

Remaining 65% reimbursed to employer, plan, or insurer payroll tax credit

Can last up to 9 months

Affects periods of coverage beginning on or after 2/17 (generally March 1)

Available for both Federal and State coverage

Includes second election period

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Assistance Eligible Individual

Generally, an individual:

Who is qualified beneficiary as the result of the involuntary termination of employment during the period from September 1, 2008 through December 31, 2009

Who is eligible for COBRA continuation coverage at any time during the period

Who elects coverage

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Tax Mechanics

Tax treatment for individuals

Tax treatment for employer, plan, or issuer

Form 941

Overpayments and reconciliations

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Maximum Duration

Premium reduction generally available

From later of:

Beginning of COBRA continuation coverage; or date of enactment.

Until earliest of:

9 months;

Eligibility under other group health plan or Medicare; or

End of COBRA continuation period.

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Recapture/Penalty Tax

If assistance eligible individual fails to notify plan of eligibility for other coverage, 110 percent tax generally applies to premium assistance received after eligibility

If assistance eligible individual’s income for year exceeds certain levels, all or part of premium assistance received is recaptured with a 100 percent tax.

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Extended Election Period

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ARRA provides second chance to elect COBRA for certain individuals who do not have a COBRA election in effect on the date of enactment. Election limited to individuals who are qualified

beneficiaries as the result of an employee termination during period from September 1, 2008 to December 31, 2009 under plan subject to Federal continuation coverage, and either did not elect COBRA continuation coverage, or who elected it but subsequently discontinued COBRA.

The individual has 60 days after receiving the notice to make the election.

Resulting COBRA coverage begins with the first period of coverage after enactment (generally March 1).

Period from loss of coverage to coverage under election ignored for purposes of determining if preexisting condition exclusion applies.

General Notice

Plans subject to the Federal COBRA provisions must send the General Notice to—

All qualified beneficiaries (not just covered employees),

Who experienced a qualifying event at any time from September 1, 2008 through December 31, 2009 (regardless of the type of qualifying event), AND

Who either have not yet been provided an election notice or who were provided an election notice on or after February 17, 2009 that did not include the additional information required by ARRA.

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General Notice (continued)

An abbreviated version of the General Notice that includes the same information as the full version regarding the availability of the premium reduction and other rights under ARRA, but does not include the COBRA coverage election information may be sent in lieu of the full version to—

Individuals who experienced a qualifying event during on or after September 1, 2008,

Have already elected COBRA coverage, and

Still have it.

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Alternative Notice

Insurance issuers that provide group health insurance coverage must send the Alternative Notice to persons who became eligible for continuation coverage under a State law.

Continuation coverage requirements vary among States, and, in addition to providing the information related to ARRA, issuers should conform these notices to applicable State law.

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Notice in Connection with

Extended Election Periods

Plans subject to the Federal COBRA provisions must send the Notice in Connection with Extended Election Periods to any assistance eligible individual (or any individual who would be an assistance eligible individual if a COBRA continuation election were in effect) who:

1. Had a qualifying event at any time from September 1, 2008 through February 16, 2009; and

2. Either did not elect COBRA continuation coverage, or who elected it but subsequently discontinued COBRA.

This notice must include information on ARRA’s additional election opportunity, as well as premium reduction information and must be provided by April 18, 2009.

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Expedited Review

If the plan determines that you are not eligible for the premium reduction, you can request an expedited review of the denial.

The Department of Labor will handle appeals related to private sector employer plans subject to ERISA’s COBRA provisions.

The Department of HHS will handle appeals for local governmental employees, as well as appeals related to group health insurance coverage provided pursuant to state continuation coverage laws.

The Departments are required to make a determination regarding your appeal within 15 business days after receiving your completed application for review. EBSA

Expedited Review (continued)

Appeals to the Department of Labor must be submitted on a specified form. The form will be made available at www.dol.gov/COBRA and can be completed online or submitted via mail or fax as indicated in the instructions.

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Additional Resources

Guidance and other information is available on the Department of Labor web site at www.dol.gov/COBRA. You can also call 1.866.444.3272 to speak to an Employee Benefits Security Administration Benefits Advisor.

Information about ARRA’s premium reduction provisions is also available from the IRS and the Department of Health and Human Services, which, along with the Department of Labor, share responsibility for COBRA and the new requirements added by ARRA.

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Questions?

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