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Congress And President Provide Yet Another Short Term COBRA Subsidy Extension

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Resource: COBRA Subsidy Extension 4 20 2010.pdf

On April 15, 2010, Congress passed the Continuing Extension Act of 2010, which extended the COBRA subsidy eligibility period to include individuals who are involuntarily terminated on or before May 31, 2010. The President signed the Act late on April 15. As detailed in prior Alerts, the subsidy covers 65% of the cost of COBRA coverage while the former employee pays the remaining 35%. The Employer may then recover the subsidy amount through their payroll tax payments and the Employer’s Quarterly Federal Tax Return (Form 941).

Congress previously extended the COBRA subsidy eligibility period to March 31, 2010, but failed to further extend the deadline prior to the March 31 expiration. The Act extends eligibility retroactively, so individuals involuntarily terminated after March 31 but before April 15 now are eligible to receive the subsidy. Employers must notify eligible individuals of the subsidy, including those who received COBRA notices during the lapse in the subsidy coverage. Employers also must update their COBRA Notices and forms to reflect the expanded eligibility dates for the subsidy.

While this law only extends the COBRA subsidy eligibility period through May 31, Congress currently is considering an extension through December 31, 2010.

Please contact a McMahon Berger attorney with questions about these or any other issues.

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