On December 19th President Obama signed into law H.R.3326 - Department of Defense Appropriations Act, 2010 which contains the anticipated extension of the federal COBRA subsidy. The changes to the federal COBRA subsidy are effective immediately. Below is a summary of the new subsidy extension provisions.

Extending the period during which individuals may qualify for the subsidy:

Original Law – Both involuntary termination and COBRA continuation start date must occur by December 31, 2009.

New Law - Involuntary termination must occur no later than February 28, 2010.
The original law required the Assistance Eligible Individual's Qualifying Event to occur, and COBRA continuation coverage to begin no later than December 31, effectively denying the subsidy to many otherwise eligible Assistance Eligible Individuals whose active coverage extended through December 31. The new provision only requires the involuntary termination to occur on or before February 28, 2010 regardless of when the individual's COBRA eligibility period begins.

Extending the length of the subsidy:

Original Law – maximum 9-months of subsidy
New Law – maximum 15-months of subsidy

Assistance Eligible Individuals who exhausted the subsidy (generally beginning in November) and subsequently dropped or modified their COBRA coverage, are entitled to an extension of their December payment due date. (NOTE: Because COBRA is a federal law, this extension of the payment period is not binding on state plans not subject to the federal law. The individual states will have to address this issue relating to insurance plans in their specific state.)

Assistance Eligible Individuals who continued COBRA by paying the full premium will be entitled to a credit and must be notified of the Plan's application of the credit under rules similar to the original law.

Plans are required to provide notices to individuals affected by these changes explaining the revised provisions, as well as the Assistance Eligible Individuals' rights and responsibilities under the new law, including any reinstatement rights.

The timing for distribution of the notices is generally tied to either the date of passage or, if applicable, the date the COBRA subsidy was exhausted by an Assistance Eligible Individual.

If you have questions concerning technical details as to how this extension affects your COBRA eligible former or furloughed staff, you should consult with your benefits broker and/or COBRA administrator.

Note: Thank you to the folks at the LWHRA e-networks group for this information!