Publications
New Federal Subsidy of COBRA Premiums Under the American Recovery and Reinvestment Act of 2009
The American Recovery and Reinvestment Act of 2009 (the “Act”) passed by both Houses and signed into law by President Obama on February 17, 2009, provides for a federal subsidy for COBRA premiums paid by involuntarily terminated employees. This client advisory briefly summarizes the provision of the Act pertaining to the subsidy and highlights the requirements of employers and plan administrators.
Entitlement to Subsidized COBRA Premiums for a Limited Period
Under the Act, the federal government will subsidize 65 of COBRA premiums actually charged to “assisted eligible idnividuals” (AEI) for a maximum period of 9 months, beginning March 1, 2009. To qualify for the subsidy, an employee must have been involuntarily terminated for reasons other than gross misconduct during the period from September 1, 2008 through December 31, 2009. The subsidy does not apply to employees who voluntarily resign or who remain employed but lose medical coverage due to a reduction of work hours.