From the April 2010 issue of Consumer Driven.
To work in the arena of COBRA administration without good legal advice is like going into a pitch black room, swinging a stick and hoping to hit the light switch. In this rapidly changing area, the key to success is access to accurate and timely legal information. And when that information is being disseminated by the IRS or Department of Labor, it helps to be as close to those entities as possible.
When the American Recovery and Reinvestment Act became law on Feb. 17, 2009, it provided a 65 percent subsidy of COBRA premiums for up to nine months for anyone who experienced an involuntary termination on or after Sep. 1, 2008, and on or before Dec. 31, 2009. Employers then proceeded to experience roughly double the number of those electing COBRA continuation. A rash of long nights and headaches broke out throughout the ranks of some COBRA software vendors and administrators. We urged caution, kept our ears on Capitol Hill and advised clients every step of the way.
On Dec. 19, 2009, the Department of Defense Appropriations Act of 2010 extended the eligibility to qualify for the subsidy by two months – until February 28, 2010 and also added six months of subsidy for a total of up to 15 months. At this point, a lot of administrators started to think, “Oh my God, how do I get out of COBRA?!”
And many did.
But many other administrators saw the opportunity amid the chaos. Suddenly, it was “Oh my God, we gotta get into COBRA.” Those already administering COBRA took a deep breath, clung to their legislative and technical partners and methodically addressed the new subsidy with an even cooler head then during the first subsidy. And their books of COBRA business grew immensely.
And then came talk of another extension of the COBRA subsidy. But not before the politicians got to have their time on CSPAN. A vote on the one-month stop-gap extension was delayed for four days by U.S. Sen. Jim Bunning, R-Ky. Bunning insisted there be a discussion of how to fund the subsidy (What a novel idea). However, rational Bunning's stance, the fact of the matter was that this holdup was also holding up unemployment benefits and that was not considered politically popular by either party. After making his point, Bunning relented and TEA passed on March 2.
Technically, TEA extended the qualification for COBRA subsidy for involuntary terminations until March 31. Previously, the cut-off date was March 28. The number of subsidized months remains at 15 months. And those qualified to be treated as an assistance eligible individual now include anyone who experienced a qualifying event of reduction of hours on or after 9/1/08 and subsequently experience an Involuntary Termination on or after March 2, 2010 (enactment date of HR 4691 Extension) through March 31.
If the individual is not currently on COBRA, whether they originally elected and subsequently had their COBRA terminated or they never elected, they will now have a second chance opportunity to elect COBRA. Their 18 months of COBRA will be calculated from the original QE date for the Reduction of Hours. Similar to the original ARRA enactment, there will be some who will have a gap in coverage.
By now, well-informed vendors and administrators have settled to a calm and cool approach to subsidies. The long nights and headaches are all but gone. That's not to say getting here has been easy. During the last COBRA extension, I personally presented six different Webinars over a two-day period, each of which was different due to new clarifications and discussions by Alston & Bird with the DOL and IRS. They literally got the information from the horses' mouths.
We often joked it was coming from the other end of the horse, but all in all, the IRS and DOL have done a great job. As I implied earlier, COBRA law can be a dark and lonely place. If you don't have good legal counsel, you probably aren't in COBRA. If you are thinking about getting into COBRA, take my advice, “Don't go in there alone.” Get with partners that are proficient in the law and prosper where others fear to tread.
|More COBRA subsidy coverage from BenefitsPro
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