EMPLOYER & LABOR CLIENT ALERT:      January 2010

On December 21, 2009, President Obama signed legislation that extends the eligibility period under the American Recovery and Reinvestment Act of 2009 (ARRA) for the COBRA premium reduction for an additional two months (through Feb. 28, 2010).

The new legislation also extends the number of months an eligible individual can receive the subsidy for an additional six months, i.e. from nine (9) to fifteen (15) months. Eligible individuals who had reached the end of the reduced premium period before the legislation extended it to 15 months, and who failed to pay their full unsubsidized premiums, will have additional time to pay the reduced premiums related to the extension. To continue their coverage they must pay the 35% of premium costs by 60 days after date of enactment or, if later, 30 days after notice of the extension is provided by their plan administrator.

ARRA mandates that plans notify certain current and former participants and beneficiaries about the premium reduction. To help employers, plans and individuals comply with these amendments, the Department of Labor’s Employee Benefits Security Administration just updated its website to reflect the recent changes in the law. It added an updated fact sheet, FAQS for employees, and posters and flyers for employers. To check the website for updated notices, visit www.dol.gov/COBRA .

Employers are encouraged to download the updated model notices reflecting the changes as Employers are obligated to provide notice of the changes. Specifically, Employers must amend their current COBRA subsidy paperwork to reflect:

• the extra six months of coverage;
• the new February cut-off date to qualify for the subsidy; and
• the fact that individuals’ eligibility for the subsidy is conditioned only on the date of their involuntary employment termination (instead of the date of their employment termination and the date their COBRA coverage period begins).

Employers will also need to take the following actions:

• include the above information in their standard COBRA package from this point on.
• develop a notice to provide to current and future COBRA beneficiaries that details the premium subsidy extension created by the new legislation.
• provide additional notice to certain individuals whose subsidy periods expired and who failed to pay their full unsubsidized premiums. Such notice should inform applicable individuals about the new legislation and that they can make retroactive premium payments in order to maintain their COBRA coverage.

The U.S. House of Representatives also recently passed a major appropriations bill with a provision that would extend the COBRA premium subsidy to individuals who are involuntarily terminated through June 30, 2010. However, the Senate is not expected to act on this legislation until later in 2010.

For additional background information regarding the original legislation and how it affects employers, please visit our website at www.lcrlaw.com and look for the April 2009 E-Alert posted there entitled, “Department of Labor and the Internal Revenue Service Issues Long-Awaited Guidance and Forms for Employers under the New Economic Stimulus Laws.”

If you have any questions about any of the issues raised in this Employer Alert, or any employment and labor issue or concern, please call Thomas Ryan, Esq. or Linda Day, Esq. of Laddey, Clark & Ryan’s Employment and Labor Practice Group at (973) 729-1880. If you do not wish to receive updates concerning developments in the law which could affect your business in the future, please indicate your preference below, and we will take you off our e-mail list.

The Employment and Labor Practice Group

Thomas N. Ryan, Esq.	Michael S. Garofalo, Esq.	Ursula H. Leo, Esq.	Linda Day, Esq.