Cobra Continuation Coverage Requirements

March 13, 2024

375 / What are the results for COBRA purposes if an employer stops making contributions to a multiemployer health plan?

<div class="Section1">It is not considered a COBRA qualifying event if an employer stops making contributions to a multiemployer plan. Further, when an employer stops making contributions to a multiemployer group health plan, the plan continues to be obligated to make COBRA continuation coverage available to qualified beneficiaries associated with the employer. Once the employer provides group health insurance to a significant number of employees who were formerly covered under the multiemployer plan or starts contributing to another multiemployer plan, the employer’s plan or the new multiemployer plan must assume the COBRA obligation.<a href="#_ftn1" name="_ftnref1">1</a></div> <div class="Section1"> If, however, the employer that stops contributing to the multiemployer plan makes group health plan coverage available to (or starts contributing to another multiemployer plan that is a group health plan) a class of the employer’s employees formerly covered under the multiemployer plan, the plan maintained by the employer (or the other multiemployer plan), from that date forward, has the obligation to make COBRA continuation coverage available to any qualified beneficiary who was receiving coverage under the multiemployer plan on the day before the cessation of contributions. The qualifying event must have occurred in connection with a covered employee whose last employment prior to the qualifying event was with the employer. </div> <div class="refs"> <hr align="left" size="1" width="33%" /> <a href="#_ftnref1" name="_ftn1">1</a>. Treas. Reg. § 54.4980B-9, A-10. </div>

March 13, 2024

359 / What are the tax implications of any premium reductions under the COBRA temporary premium assistance rules?

<div class="Section1">The amount of any COBRA premium reduction taken under the special rules enacted in 2009 and 2010 (see Q <a href="javascript:void(0)" class="accordion-cross-reference" id="357">357</a> and Q <a href="javascript:void(0)" class="accordion-cross-reference" id="358">358</a>) was excluded from an individual’s gross income.<a href="#_ftn1" name="_ftnref1">1</a> If the premium reduction was provided with respect to any COBRA continuation coverage that covered an individual, the individual’s spouse, or the individual’s dependent, and the individual’s modified adjusted gross income, that is, the adjusted gross income plus amounts excluded under IRC Sections 911, 931, or 933, exceeded $145,000, or $290,000 for married couples filing jointly, then the amount of the premium reduction was recaptured as an increase in the individual’s federal income tax liability.<a href="#_ftn2" name="_ftnref2">2</a> The recapture was phased in for individuals with a modified adjusted gross income in excess of $125,000, or $250,000 for married couples filing jointly.<a href="#_ftn3" name="_ftnref3">3</a> An individual was able to elect to permanently waive the right to the premium reduction, for example, to avoid receiving and then repaying the premium reduction.<a href="#_ftn4" name="_ftnref4">4</a><div class="refs"> <hr align="left" size="1" width="33%"> <a href="#_ftnref1" name="_ftn1">1</a>.     IRC § 139C, as added by ARRA 2009. See also Notice 2009-27, 2009-16 IRB 838, 839. <a href="#_ftnref2" name="_ftn2">2</a>.     See § 3001(b)(1), ARRA 2009. See also Notice 2009-27, 2009-16 IRB 838, 839. <a href="#_ftnref3" name="_ftn3">3</a>.     See § 3001(b)(2), ARRA 2009. See also Notice 2009-27, 2009-16 IRB 838, 839. <a href="#_ftnref4" name="_ftn4">4</a>.     See § 3001(b)(3), ARRA 2009. See also Notice 2009-27, 2009-16 IRB 838, 839. </div></div>

March 13, 2024

367 / Who is a covered employee for purposes of the COBRA continuation coverage requirements? Who is a similarly situated non-COBRA beneficiary?

<div class="Section1">A covered employee is any individual who is or was provided coverage under a group health plan by virtue of the individual’s performance of services for one or more persons maintaining the plan, including as an employee defined in IRC Section 401(c)(1), or because of membership in an employee organization that maintains the plan.<a href="#_ftn1" name="_ftnref1">1</a></div> <div class="Section1"> In addition, the following persons are employees if their relationship to the employer maintaining the plan makes them eligible to be covered under the plan: self-employed individuals, independent contractors and their agents and independent contractors, and corporate directors.<a href="#_ftn2" name="_ftnref2">2</a> A person eligible for coverage but not actually covered is not a covered employee. Final COBRA regulations introduce the term similarly situated non-COBRA beneficiaries, defined as a group of covered employees, their spouses, or their dependent children receiving coverage under an employer’s or employee organization’s group health plan for a reason other than the rights provided under the COBRA requirements and who most similarly are situated to the qualified beneficiary just before the qualifying event, based on all the facts and circumstances.<a href="#_ftn3" name="_ftnref3">3</a> COBRA beneficiaries are accorded the same rights and coverage as similarly situated non-COBRA beneficiaries. </div> <div class="refs"> <hr align="left" size="1" width="33%" /> <a href="#_ftnref1" name="_ftn1">1</a>. IRC § 4980B(f)(7); Treas. Reg. § 54.4980B-3, A-2. <a href="#_ftnref2" name="_ftn2">2</a>. Treas. Reg. § 54.4980B-3, A-2. <a href="#_ftnref3" name="_ftn3">3</a>. Treas. Reg. § 54.4980B-3, A-3. </div>

March 13, 2024

360 / Are all employers subject to COBRA continuation coverage requirements?

<div class="Section1">No.<div class="Section1"> Church plans, as defined in IRC Section 414(e), governmental plans, as defined in IRC Section 414(d), and small-employer plans generally are not subject to COBRA continuation coverage requirements, although there are temporary rules applicable to small employers under the American Recovery and Reinvestment Act of 2009 (“ARRA”).<a href="#_ftn1" name="_ftnref1">1</a> ARRA provided a temporary premium subsidy for COBRA continuation coverage for certain unemployed workers ( Q <a href="javascript:void(0)" class="accordion-cross-reference" id="356">356</a>) and also applied to small employers if health care continuation coverage was required by a state.<a href="#_ftn2" name="_ftnref2">2</a> A small-employer plan is defined as a group health plan maintained by an employer that normally employed fewer than 20 employees during the preceding calendar year on a typical business day.<a href="#_ftn3" name="_ftnref3">3</a> Under final regulations, an employer is considered to have employed fewer than 20 employees during a calendar year if it had fewer than 20 employees on at least 50 percent of its typical business days during that year. Only common law employees are taken into account for purposes of the small-employer exception. Self-employed individuals, independent contractors, and directors are not counted. In the case of a multiemployer plan, a small-employer plan is a group health plan under which each of the employers contributing to the plan for a calendar year normally employed fewer than 20 employees during the preceding calendar year.<a href="#_ftn4" name="_ftnref4">4</a> </div><div class="refs"> <hr align="left" size="1" width="33%"> <a href="#_ftnref1" name="_ftn1">1</a>.     IRC § 4980B(d). <a href="#_ftnref2" name="_ftn2">2</a>.     Section 3001(a)(10)(B) of ARRA 2009. <a href="#_ftnref3" name="_ftn3">3</a>.     IRC § 4980B(d). <a href="#_ftnref4" name="_ftn4">4</a>.     Treas. Reg. § 54.4980B-2, A-5. </div></div>

March 13, 2024

362 / Under what circumstances do employees serving in the military receive COBRA-like health insurance coverage continuation?

<div class="Section1">The call to active military duty of reserve personnel has been characterized as a qualifying event by the IRS. Although not specifically stated, the event presumably is a reduction in hours.<a href="#_ftn1" name="_ftnref1">1</a></div> <div class="Section1"> Employees serving in the uniformed services are entitled to COBRA-like continuation health coverage under the Uniformed Services Employment and Reemployment Rights Act<a href="#_ftn2" name="_ftnref2">2</a> regardless of whether the employer is otherwise exempt from COBRA’s continuation coverage requirements. Consequently, employers with fewer than 20 employees must provide continuation benefits to service members even in the absence of an obligation to do so under COBRA. The Veteran’s Benefit Improvement Act of 2004 increased the period for which the employee may elect from 18 to 24 months. This extension applies to all continuation elections made after December 10, 2004. </div> <div class="refs"> <hr align="left" size="1" width="33%" /> <a href="#_ftnref1" name="_ftn1">1</a>. Notice 90-58, 1990-2 CB 345. <a href="#_ftnref2" name="_ftn2">2</a>. USERRA, 38 USC § 4317(a). </div>

March 13, 2024

368 / Who must pay the cost of COBRA continuation coverage and how is the cost calculated?

<div class="Section1">Editor’s Note: See Q <a href="javascript:void(0)" class="accordion-cross-reference" id=""></a> for a discussion of the special rules that were enacted in 2020 in response to the COVID-19 pandemic.<div class="Section1"> A plan may require a qualified beneficiary to pay a premium for continuation coverage. The premium generally cannot exceed a percentage of the applicable premium. The applicable premium is the plan’s cost for similarly situated beneficiaries ( Q <a href="javascript:void(0)" class="accordion-cross-reference" id="367">367</a>) with respect to whom a qualifying event has not occurred. The applicable premium for each determination period must be fixed by the plan before the determination period begins. A determination period is defined as any 12 month period selected by the plan, provided that it is applied consistently from one year to the next. Because the determination period is a single period for any benefit package, each qualified beneficiary will not have a separate determination period.<a href="#_ftn1" name="_ftnref1">1</a> Except as provided under ARRA 2009 ( Q <a href="javascript:void(0)" class="accordion-cross-reference" id="356">356</a>), the percentage of the applicable premium that may be charged is generally 102 percent. In the case of a disabled qualified beneficiary, the premium may be as much as 150 percent of the applicable premium for any month after the 18 month of continuation coverage. A plan may require payment equal to 150 percent of the applicable premium if a disabled qualified beneficiary experiences a second qualifying event during the disability extension period, after the 18 month. The 150 percent amount may be charged until the end of the 36 month maximum period of coverage, that is, from the beginning of the 19 month through the end of the 36th month. A plan that does so will not fail to comply with the nondiscrimination requirements of IRC Section 9802(b).<a href="#_ftn2" name="_ftnref2">2</a> Coverage may not be conditioned on evidence of insurability and cannot be contingent on an employee’s reimbursement of his or her employer for group health plan premiums paid during a leave taken under the Family and Medical Leave Act of 1993.<a href="#_ftn3" name="_ftnref3">3</a> During a determination period, a plan may increase the cost of the COBRA coverage only if the plan has previously charged less than the maximum amount permitted and even after the increase the maximum amount will not be exceeded or a qualified beneficiary changes his or her coverage. If a plan allows similarly situated active employees to change their coverage, each qualified beneficiary must be given the same opportunity.<a href="#_ftn4" name="_ftnref4">4</a> A qualified beneficiary must be permitted to make premium payments on at least a monthly basis. Any person or entity may make the required payment for COBRA continuation coverage on behalf of a qualified beneficiary.<a href="#_ftn5" name="_ftnref5">5</a> COBRA premiums must be paid in a timely fashion, which is defined as 45 days after the date of election for the period between a qualifying event and an election, and 30 days after the first date of the period for all other periods.<a href="#_ftn6" name="_ftnref6">6</a> An employer may retroactively terminate COBRA continuation coverage if the initial premium is not timely paid. In Harris v. United Automobile Insurance Group, Inc.,<a href="#_ftn7" name="_ftnref7">7</a> the 11th Circuit Court of Appeals ruled that the additional time provided in Treasury Regulation Section 54.4980B-8, A-5, applies only to those plans that are fully funded, that is, that involve an agreement with an insurance company to provide benefits. Because the health plan in Harris was funded and sponsored by the company (so that it was self-funded), the IRS regulation did not apply. Consequently, the time for submitting the taxpayer’s premium payment was not extended beyond that provided by the plan. Accordingly, the company was within its right in terminating the taxpayer’s coverage. In effect, the Harris court ruled that the employer did not have an “arrangement” under which it was given a certain period of time to pay for the coverage of non-COBRA beneficiaries. The additional time frame provided in the regulation applies only to those plans that are fully-funded, meaning those that involve an agreement with an insurance company to provide benefits. An employer is not required to set off the premium amount against the amount of a claim incurred during the 60 day election period but before the election was made.<a href="#_ftn8" name="_ftnref8">8</a> A plan must treat a timely payment that is not significantly less than the required amount as full payment, unless the plan notifies the qualified beneficiary of the amount of the deficiency and grants a reasonable period for payment. A reasonable period of time for this purpose is 30 days after the date when notice is provided. An amount will be considered as not significantly less if the shortfall is no greater than the lesser of $50 or 10 percent of the required amount.<a href="#_ftn9" name="_ftnref9">9</a> Revenue Ruling 96-8 provides some guidance in the area of determining COBRA costs.<a href="#_ftn10" name="_ftnref10">10</a> See Q <a href="javascript:void(0)" class="accordion-cross-reference" id="369">369</a> for a discussion of the Health Coverage Tax Credit. </div><div class="refs"> <hr align="left" size="1" width="33%"> <a href="#_ftnref1" name="_ftn1">1</a>.     Treas. Reg. § 54.4980B-8, A-2(a). <a href="#_ftnref2" name="_ftn2">2</a>.     IRC § 4980B(f)(2)(C); Treas. Reg. § 54.4980B-8, A-1. <a href="#_ftnref3" name="_ftn3">3</a>.     IRC § 4980B(f)(2)(D); Treas. Reg. § 54.4980B-10, A-5; Notice 94-103, 1994-2 CB 569. <a href="#_ftnref4" name="_ftn4">4</a>.     Treas. Reg. § 54.4980B-8, A-2(b). <a href="#_ftnref5" name="_ftn5">5</a>.     Treas. Reg. § 54.4980B-8, A-3, A-5. <a href="#_ftnref6" name="_ftn6">6</a>.     Treas. Reg. § 54.4980B-8, A-5. <a href="#_ftnref7" name="_ftn7">7</a>.     Harris v. United Automobile Insurance Group, Inc., 579 F.3d 1227 (11th Cir. 2009). <a href="#_ftnref8" name="_ftn8">8</a>.     Goletto v. W. H. Braum Inc., 25 EBC 1974 (10th Cir. 2001). <a href="#_ftnref9" name="_ftn9">9</a>.     Treas. Reg. § 54.4980B-8, A-5(b). <a href="#_ftnref10" name="_ftn10">10</a>.   Rev. Rul. 96-8, 1996-1 CB 286. </div></div>

March 13, 2024

366 / Who is a qualified beneficiary for purposes of COBRA continuation coverage requirements?

<div class="Section1">With respect to a covered employee under a group health plan, a qualified beneficiary is any other individual who, on the day prior to that covered employee’s qualifying event, is a covered employee’s spouse or dependent child. A child born to or placed for adoption with a covered employee during the period of continuation coverage is included in the definition of qualified beneficiary.<a href="#_ftn1" name="_ftnref1">1</a> Agents, independent contractors, and directors who participate in the group health plan may also be qualified beneficiaries.<a href="#_ftn2" name="_ftnref2">2</a> Each qualified beneficiary has individual rights so that continuation decisions may be made on a person by person basis.</div> <div class="Section1"> Employers are not required to offer COBRA continuation coverage to domestic partners, though some employers have negotiated with their insurance companies to do so. If a qualifying event is a proceeding in a case under federal bankruptcy law, a qualified beneficiary is any covered employee who retired on or before the date of substantial elimination of coverage and individuals who, on the day before bankruptcy proceedings commence, were covered under the plan as a covered employee’s spouse, surviving spouse, or dependent child.<a href="#_ftn3" name="_ftnref3">3</a> Where a qualifying event is a change in employment status of a covered employee, qualified beneficiaries are the covered employee, spouse and dependent children covered under the plan on the day before the qualifying event.<a href="#_ftn4" name="_ftnref4">4</a> If a qualifying event is a covered employee’s death, divorce, or legal separation, or the covered employee’s entitlement to Medicare, the qualified beneficiaries are the covered employee’s spouse and dependent children who were covered under the plan the day before the qualifying event.<a href="#_ftn5" name="_ftnref5">5</a> If a qualifying event is the loss of a covered child’s dependent status, then that dependent child is the only qualified beneficiary.<a href="#_ftn6" name="_ftnref6">6</a> The term qualified beneficiary does not include an individual who is covered under a group health plan due to another individual’s election of COBRA continuation coverage and not by a prior qualifying event. This means that an individual who marries a qualified beneficiary other than the covered employee on or after the date of the qualifying event does not become a qualified beneficiary in his or her own right by reason of the marriage. Likewise, a child born to or placed for adoption with a qualified beneficiary does not become a qualified beneficiary. New family members do not become qualified beneficiaries themselves, even if they become covered under the group health plan.<a href="#_ftn7" name="_ftnref7">7</a> A person whose status as a covered employee is attributable to a time when the person was a nonresident alien who received no earned income from the person’s employer that constituted income from sources within the United States is not a qualified beneficiary.<a href="#_ftn8" name="_ftnref8">8</a> An individual who does not elect COBRA continuation coverage ceases to be a qualified beneficiary at the end of the election period.<a href="#_ftn9" name="_ftnref9">9</a> There are situations in which a second qualifying event occurs. For example, an employee terminates employment and then subsequently divorces. In this situation, the maximum period of coverage for the employee remains 18 months and the maximum period for the impacted dependents remains 36 months. Notice must be provided to the plan administrator to obtain this extension. </div> <div class="refs"> <hr align="left" size="1" width="33%" /> <a href="#_ftnref1" name="_ftn1">1</a>. IRC § 4980B(g)(1)(A); Treas. Reg. § 54.4980B-3, A-1. <a href="#_ftnref2" name="_ftn2">2</a>. FAQs for Employees About COBRA Continuation Health Coverage, U.S. Department of Labor Employee Benefits Security Administration. <a href="#_ftnref3" name="_ftn3">3</a>. IRC § 4980B(g)(1)(D); Treas. Reg. § 54.4980B-3, A-1. <a href="#_ftnref4" name="_ftn4">4</a>. IRC § 4980B(f)(3). <a href="#_ftnref5" name="_ftn5">5</a>. IRC § 4980B(f)(3). <a href="#_ftnref6" name="_ftn6">6</a>. IRC § 4980(f)(3)(E). <a href="#_ftnref7" name="_ftn7">7</a>. Treas. Reg. § 54.4980B-3, A-1. <a href="#_ftnref8" name="_ftn8">8</a>. IRC § 4980B(g)(1)(C). <a href="#_ftnref9" name="_ftn9">9</a>. Treas. Reg. § 54.4980B-3, A-1. </div>

March 13, 2024

370 / How does an individual claim the additional 7.5 percent retroactive health coverage tax credit?

<div class="Section1">If an eligible individual was enrolled in the monthly HCTC program during the tax year, they were sent a Form 1099-H, Health Coverage Tax Credit (HCTC) Advance Payments. This form was provided because the HCTC Program made monthly payment(s) to the individual’s health plan administrator in one or months in the tax year.</div> <div class="Section1"> Boxes 3 through 14, on Form 1099-H, reflect the tax credit amount the individual received for each month in (an 80 percent tax credit for payments made by the HCTC Program in January and February and a 65 percent tax credit for payments made in March through December). To claim the additional 7.5 percent retroactive credit: <ol> <li>Refer to the box to the left of box 8 on Form 1099-H. This is the additional 7.5 percent retroactive credit that the HCTC Program has calculated. If the amount listed is $0.00, there is no retroactive credit amount.</li> <li>Complete and file Form 8885, Health Coverage Tax Credit, with Form 1040, U.S. Individual Income Tax Return. Enter the retroactive tax credit amount on line 7 of Form 8885, Health Coverage Tax Credit. It is not necessary to complete lines 1 through 6 and it is not necessary to submit any supporting documentation.</li> </ol> Note: If a credit is claimed for any month for which a payment was made directly to a qualified health plan, lines 1 through 6 must be completed for those months. Then, the additional 7.5 percent retroactive credit amount is added to the sum of any amount on Part II, line 6, of Form 8885 and the total is entered on Part II, line 7. All required supporting documentation must be submitted and copies should be retained. <hr /> Planning Point: Form 8885 must be filed along with Form 1040. <hr /> </div>

March 13, 2024

373 / What notice of COBRA continuation coverage is required?

<div class="Section1">Employer’s Initial Notice. A plan must provide written notice of COBRA continuation coverage rights to each covered employee and spouse at the commencement of their coverage under the plan<a href="#_ftn1" name="_ftnref1">1</a> and the COBRA rights provided under the plan must be described in the plan’s summary plan description (SPD).</div> <div class="Section1"> ERISA requires group health plans to give covered employees an SPD within 90 days after the employee first becomes a participant in a plan (or within 120 days after the plan is first subject to the reporting and disclosure provisions of ERISA). In addition, if there are material changes to the plan, the plan must give employees a summary of material modifications (SMM) not later than 210 days after the end of the plan year in which the changes become effective. If the change is a material reduction in covered services or benefits, the SMM must be furnished not later than 60 days after the reduction is adopted. A participant or beneficiary covered under the plan may request a copy of the SPD and any SMMs (as well as any other plan documents), which must be provided within 30 days of a written request. Within the first 90 days of coverage, group health plans must give each employee and each spouse who becomes covered under the plan a general notice describing COBRA rights.<a href="#_ftn2" name="_ftnref2">2</a> Notice to Plan Administrator. An employer must notify a plan administrator within 30 days of the date when any of the following qualifying events occur: <blockquote>(1) the death of a covered employee; (2) the termination or reduction in hours of employment of a covered employee; (3) a covered employee’s becoming entitled to Medicare benefits; or (4) a proceeding in a case under federal bankruptcy law.<a href="#_ftn3" name="_ftnref3">3</a></blockquote> Notice to Employer. A covered employee or spouse must notify the employer of a divorce or legal separation within 60 days.<a href="#_ftn4" name="_ftnref4">4</a> At least one court has permitted a covered employee to terminate coverage for the employee’s soon to be ex-spouse. That court denied the COBRA coverage the spouse sought upon learning that the spouse’s coverage had been terminated because neither the spouse nor the covered employee had provided timely notice of the divorce to the employer.<a href="#_ftn5" name="_ftnref5">5</a> Where a covered employee told a plan administrator that he had divorced his spouse before directing that her coverage be terminated, the notice requirement was satisfied and the spouse had to be notified of her right to elect COBRA continuation coverage.<a href="#_ftn6" name="_ftnref6">6</a> An individual who ceases to be a dependent child is required to notify the employer of this occurrence within 60 days.<a href="#_ftn7" name="_ftnref7">7</a> Notice to Qualified Beneficiary. Within 14 days of receiving notice from an employer, a plan administrator must notify any qualified beneficiary with respect to a qualifying event.<a href="#_ftn8" name="_ftnref8">8</a> If coverage is continued at the employer’s expense after the qualifying event, this notice may be delayed until coverage actually is lost.<a href="#_ftn9" name="_ftnref9">9</a> This notice requirement will be deemed satisfied if notice is sent to the qualified beneficiary’s last known address by first class mail, unless the plan administrator has reason to know that this method of delivery has failed.<a href="#_ftn10" name="_ftnref10">10</a> <hr /> Planning Point: The Fifth Circuit<a href="#_ftn11" name="_ftnref11">11</a> found that an employee’s retirement constituted a qualifying event that triggered the employer’s notice obligations. In this case, the employee was placed on paid administrative leave, exhausted her paid leave benefits and was then placed on unpaid leave until she later retired. The employer paid the employee portion of her insurance premiums until her retirement. Later, an insurance claim was denied, and the employee was notified that she owed back insurance premiums and at that point received a COBRA notice. The court found that while placement on unpaid leave was not a qualifying event, her retirement did constitute a qualifying event because she experienced a loss of health coverage since she was unable to keep her insurance at the same rate. That retirement triggered the employer’s COBRA notice obligations. The court was clear that there is no requirement that the qualifying event be “contemporaneous” with the qualifying event--but instead may occur within 18 months of the qualifying event. Because the employee did not receive her COBRA notice on time, there was a violation. <hr /> Notice of Disability. Additionally, each qualified beneficiary determined under Title II or XVI of the Social Security Act to have been disabled at any time during the first 60 days of continuation coverage must notify the plan administrator of that determination within 60 days after the date of that determination and must notify the plan administrator of any final determination that the qualified beneficiary is no longer disabled within 30 days of the date of that determination.<a href="#_ftn12" name="_ftnref12">12</a> Statute of Limitations. Because neither COBRA nor ERISA contain a statute of limitations for making a claim that the employer did not timely provide notice, courts may look to state statutes of limitations.<a href="#_ftn13" name="_ftnref13">13</a> Exhaustion of Administrative Remedies. Although covered employees and qualified beneficiaries generally must exhaust their administrative remedies under a plan before bringing suit, in the case of a failure to provide a COBRA election notice, exhaustion of remedies is not required, unless otherwise judicially imposed by a state court.<a href="#_ftn14" name="_ftnref14">14</a> ERISA and PHSA. COBRA continuation coverage is not only a tax requirement. There are similar requirements under ERISA and the Public Health Service Act (PHSA) with other sanctions. The Department of Labor issued proposed regulations in 2003 updating the various notices and disclosures required under COBRA.<a href="#_ftn15" name="_ftnref15">15</a> The new regulations, which were effective in their final form for plan years beginning in 2004, provide rules that set minimum standards for the timing and content of the notices required under COBRA and establish standards for administering the notice process.<a href="#_ftn16" name="_ftnref16">16</a> </div> <div class="refs"> <hr align="left" size="1" width="33%" /> <a href="#_ftnref1" name="_ftn1">1</a>. IRC § 4980B(f)(6)(A). <a href="#_ftnref2" name="_ftn2">2</a>. See An Employee’s Guide to Health Benefits Under COBRA, U.S. Department of Labor Employee Benefits Security Administration, https://www.dol.gov/sites/dolgov/files/ebsa/about-ebsa/our-activities/resource-center/publications/an-employees-guide-to-health-benefits-under-cobra.pdf. <a href="#_ftnref3" name="_ftn3">3</a>. IRC § 4980B(f)(6)(B). <a href="#_ftnref4" name="_ftn4">4</a>. IRC § 4980B(f)(6)(C). <a href="#_ftnref5" name="_ftn5">5</a>. Johnson v. Northwest Airlines, Inc., 2001 U.S. Dist. LEXIS 2160 (N.D. Cal. 2001). <a href="#_ftnref6" name="_ftn6">6</a>. Phillips v. Saratoga Harness Racing Inc., 240 F.3d 174 (2d Cir. 2001). See also Rev. Rul 2002-88, 2002-5 2 IRB 995. <a href="#_ftnref7" name="_ftn7">7</a>. IRC § 4980B(f)(6)(C). <a href="#_ftnref8" name="_ftn8">8</a>. IRC § 4980B(f)(6)(D). <a href="#_ftnref9" name="_ftn9">9</a>. Wilcock v. National Distributors, Inc., 2001 U.S. Dist. LEXIS 11413 (D. Me. 2001). <a href="#_ftnref10" name="_ftn10">10</a>. Wooderson v. American Airlines Inc., 2001 U.S. Dist. LEXIS 3721 (N.D. Texas 2001). <a href="#_ftnref11" name="_ftn11">11</a>. Randolph v. E. Baton Rouge Par. Sch. Sys., No. 21-30022, 2021 WL 5577014 (5th Cir. Nov. 30, 2021). <a href="#_ftnref12" name="_ftn12">12</a>. IRC § 4980B(f)(6)(C). <a href="#_ftnref13" name="_ftn13">13</a>. Mattson v. Farrell Distributing Corp., 163 F. Supp. 2d 411 (D. Vt. 2001). <a href="#_ftnref14" name="_ftn14">14</a>. Thompson v. Origin Tech. in Business, Inc., 2001 U.S. Dist. LEXIS 12609 (N.D. Texas 2001). <a href="#_ftnref15" name="_ftn15">15</a>. 29 CFR Part 2590, 68 Fed. Reg. 31832 (May 28, 2003). <a href="#_ftnref16" name="_ftn16">16</a>. 29 CFR Part 2590, 68 Fed. Reg. 31832 (May 28, 2003). </div>

March 13, 2024

357 / What special rules applied to COBRA premium assistance under legislation enacted in 2009 and 2010?

<div class="Section1">Ordinarily, if an unemployed worker elects to receive COBRA continuation coverage, the percentage of the applicable premium that may be charged can be as high as 102 percent ( Q <a href="javascript:void(0)" class="accordion-cross-reference" id="368">368</a>). In February 2009, Congress enacted temporary relief to help scores of unemployed workers maintain their health insurance coverage by making it more affordable.<a href="#_ftn1" name="_ftnref1">1</a> Essentially a 65 percent subsidy or premium assistance was available for COBRA continuation coverage premiums for certain workers who had been involuntarily terminated as the result of a COBRA qualifying event occurring during the period from September 1, 2008, through May 31, 2010, as extended under the Continuing Extension Act of 2010.<div class="Section1"> An assistance eligible individual was eligible for the premium reduction for up to 15 months as extended under the Department of Defense Appropriations Act of 2010 from the first month the premium reduction provisions applied to the individual. The premium reduction ended if the individual became eligible for coverage under any other group health plan or for Medicare benefits.<a href="#_ftn2" name="_ftnref2">2</a> Reduced Premium Amount In the case of any premium for a period of coverage beginning on or after February 17, 2009, an assistance eligible individual was treated for purposes of any COBRA continuation provision as having paid the amount of such premium if the individual paid 35 percent of the amount of the premium, determined without regard to the premium assistance provision.<a href="#_ftn3" name="_ftnref3">3</a> The employer was reimbursed for the other 65 percent of the premium that was not paid by the assistance eligible individual through a credit against its payroll taxes.<a href="#_ftn4" name="_ftnref4">4</a> The premium used to determine the 35 percent share that must have been paid by or on behalf of an assistance eligible individual was the cost that would be charged to him or her for COBRA continuation coverage if the individual were not an assistance eligible individual. Thus, if, without regard to the subsidy, an assistance eligible individual was required to pay 102 percent of the applicable premium for continuation coverage, that is, the maximum generally permitted under COBRA rules, the assistance eligible individual was then required to pay only 35 percent of the 102 percent of the applicable premium. If the premium that would be charged to the assistance eligible individual was less than the maximum COBRA premium, for example, if the employer subsidized the coverage by paying all or part of the cost, then the amount actually charged to the assistance eligible individual was used to determine the assistance eligible individual’s 35 percent share.<a href="#_ftn5" name="_ftnref5">5</a> In determining whether an assistance eligible individual had paid 35 percent of the premium, payments made on behalf of the individual by another person, other than an employer with respect to which an involuntary termination occurred, were taken into account; for example, by a parent, guardian, state agency, or charity.<a href="#_ftn6" name="_ftnref6">6</a> Premium Reduction Period The premium reduction applied as of the first period of coverage beginning on or after February 17, 2009 for which the assistance eligible individual was eligible to pay only 35 percent of the premium, as determined without regard to the premium reduction, and still be treated as having made full payment. For this purpose, a period of coverage was a monthly or shorter period with respect to which premiums were charged by the plan with respect to such coverage.<a href="#_ftn7" name="_ftnref7">7</a> The premium reduction applied until the earliest of: <blockquote>(1)     the first date the assistance eligible individual became eligible for other group health plan coverage, with certain exceptions, or Medicare coverage; (2)     the date that was 15 months (under the Department of Defense Authorizations Act of 2010; it was nine months under ARRA 2009) after the first day of the first month for which the ARRA premium reduction provisions applied to the individual; or (3)     the date the individual ceased to be eligible for COBRA continuation coverage.<a href="#_ftn8" name="_ftnref8">8</a></blockquote> Coverage Eligible for Premium Reduction The premium reduction was available for COBRA continuation coverage of any group health plan, except a flexible spending arrangement (“FSA”) offered under a cafeteria plan, including vision-only and dental-only plans as well as mini-med plans. The premium reduction was not available for continuation coverage offered by employers for non-health benefits that were not subject to COBRA continuation coverage, for example, group life insurance.<a href="#_ftn9" name="_ftnref9">9</a> Retiree health coverage could have been treated as COBRA continuation coverage for which the premium reduction was available only if the retiree coverage did not differ from the coverage made available to similarly situated active employees. The amount charged for the coverage could be higher than that charged to active employees and the retiree coverage still may have been eligible for the ARRA premium reduction so long as the charge to retirees did not exceed the maximum amount allowed under federal COBRA.<a href="#_ftn10" name="_ftnref10">10</a> The premium reduction also was available for COBRA continuation coverage under a health reimbursement arrangement (“HRA”). Although an HRA may qualify as an FSA, the exclusion of FSAs from the premium reduction was limited to FSAs provided through a cafeteria plan, which would not include an HRA.<a href="#_ftn11" name="_ftnref11">11</a> Premium Reduction Extension under DDAA 2010 The Department of Defense Appropriations Act of 2010 (“DDAA 2010”) amended ARRA 2009 by extending the period to qualify for the COBRA premium reduction until February 28, 2010, a period further extended to May 31, 2010, under the Continuing Extension Act of 2010, and extending the maximum period for receiving the subsidy an additional six months (from nine to 15 months).<a href="#_ftn12" name="_ftnref12">12</a> Assistance eligible individuals who had reached the end of the original premium reduction period were in a transition period which gave them additional time to pay extension-related reduced premiums.<a href="#_ftn13" name="_ftnref13">13</a> An individual’s transition period was the period that began immediately after the end of the maximum number of months, which generally was nine, of premium reduction available under ARRA prior to its amendment. An individual was in a transition period only if the premium reduction provisions would continue to apply due to the extension from nine to 15 months and they otherwise remained eligible for the premium reduction.<a href="#_ftn14" name="_ftnref14">14</a> These individuals must have been provided a notice of the extension within 60 days of the first day of their transition period.<a href="#_ftn15" name="_ftnref15">15</a> The retroactive payment or payments for the period or periods of coverage must have been made by the later of February 17, 2010, or 30 days from when the notice was provided.<a href="#_ftn16" name="_ftnref16">16</a> DOL Procedure for Denial of Premium Reduction The Department of Labor issued a fact sheet entitled “COBRA Premium Reduction” that explains its expedited review of denials of premium reduction. The DOL states that individuals, who are denied treatment as assistance eligible individuals and, thus, are denied eligibility for the premium reduction, whether by their plan, employer, or insurer, were entitled to request an expedited review of the denial by the DOL. The DOL was then required to make a determination within 15 business days of receipt of a completed request for review. </div><div class="refs"> <hr align="left" size="1" width="33%"> <a href="#_ftnref1" name="_ftn1">1</a>.       Section 3001 of ARRA 2009 (P.L. 115-5). <a href="#_ftnref2" name="_ftn2">2</a>.       Section 3 of the Continuing Extension Act of 2010; § 1010 of the Department of Defense Appropriations Act of 2009; § 3001(a) of ARRA 2009; Notice 2009-27, 2009-16 IRB 838; IRS News Release IR-2010-52 (4-26-2010). <a href="#_ftnref3" name="_ftn3">3</a>.       Section 3001(a)(1)(A) of ARRA 2009; Notice 2009-27, 2009-16 IRB 838. <a href="#_ftnref4" name="_ftn4">4</a>.       IRC § 6432(c), as added by ARRA 2009; Notice 2009-27, 2009-16 IRB 838. <a href="#_ftnref5" name="_ftn5">5</a>.       Notice 2009-27, 2009-16 IRB 838, Q&A 20. <a href="#_ftnref6" name="_ftn6">6</a>.       Notice 2009-27, 2009-16 IRB 838, Q&A 20. <a href="#_ftnref7" name="_ftn7">7</a>.       Notice 2009-27, 2009-16 IRB 838, Q&A 30. <a href="#_ftnref8" name="_ftn8">8</a>.       Notice 2009-27, 2009-16 IRB 838, Q&A 33; see § 1010, DDAA 2010 and § 3001(a)(2)(A) of ARRA 2009. <a href="#_ftnref9" name="_ftn9">9</a>.       Notice 2009-27, 2009-16 IRB 838, Q&A 27. <a href="#_ftnref10" name="_ftn10">10</a>.     Notice 2009-27, 2009-16 IRB 838, Q&A 28. <a href="#_ftnref11" name="_ftn11">11</a>.     Notice 2009-27, 2009-16 IRB 838, Q&A 29. <a href="#_ftnref12" name="_ftn12">12</a>.     Section 3001(a)(3)(A) of ARRA 2009, as amended by § 1010(a) of DDAA 2010; § 3001(a)(2)(A)(ii)(I) of ARRA 2009, as amended by § 1010(b) of DDAA 2010. <a href="#_ftnref13" name="_ftn13">13</a>.     See § 3001(a)(16)(C) of ARRA 2009, as added by § 1010(c) of DDAA 2010. <a href="#_ftnref14" name="_ftn14">14</a>.     See § 3001(a)(16)(C)(i) of ARRA 2009, as added by § 1010(c) of DDAA 2010. <a href="#_ftnref15" name="_ftn15">15</a>.     See § 3001(a)(16)(D) of ARRA 2009, as added by DDAA 2010. <a href="#_ftnref16" name="_ftn16">16</a>.     See § 3001(a)(16)(A)(ii) of ARRA 2009, as added by § 1010(c) of DDAA 2010. </div></div>