ARRA Subsidy Clarification for Involuntary Terminations Occurring in December 2009
The Department of Labor recently announced clarification regarding premium subsidy eligibility under the American Recovery and Reinvestment Act of 2009 (ARRA) that will affect involuntary terminations occurring in December 2009. As detailed in the Compliance Alert dated February 18, 2009, ARRA provides a 65% premium subsidy for up to nine months for assistance eligible individuals (AEIs) and their dependents receiving COBRA coverage or NC state continuation coverage (for further information on state continuation, see the Compliance Alert dated June 18, 2009). In order to be eligible for the subsidy, an individual must experience an involuntary termination (for reasons other than gross misconduct) and loss of coverage between September 1, 2008, and December 31, 2009. However, the key here is that the individual must become eligible for COBRA or NC state continuation on or before December 31, 2009.
With the end of the ARRA subsidy period rapidly approaching, we feel it is important to further clarify the subsidy eligibility requirements for involuntary terminations occurring in December 2009 through the following examples:
- An individual who is involuntarily terminated in December 2009 and whose coverage runs through the end of the month would lose coverage under the group health plan on December 31, 2009, at midnight and become eligible for COBRA or state continuation on January 1, 2010. Therefore, this individual would not be eligible for the ARRA premium subsidy.
- An individual who is involuntarily terminated between December 1, 2009, and December 30, 2009, and whose coverage terminates on the date of the involuntary termination would be eligible for the ARRA premium subsidy. In this example, an individual terminated on December 30, 2009, would lose coverage on December 30, 2009, at midnight and become eligible for COBRA or NC state continuation on December 31, 2009 (within the subsidy timeframe).
- An individual who is involuntarily terminated on December 31, 2009, and whose coverage terminates on the date of the involuntary termination would not be eligible for the ARRA premium subsidy. In this example, the individual would lose coverage on December 31, 2009, at midnight and become eligible for COBRA or state continuation on January 1, 2010 (outside of the subsidy timeframe).
For additional information regarding eligibility in relation to involuntary terminations occurring in December 2009, please click here to view the new DOL FAQ sheet.
As you may already be aware, there are bills pending in Congress to extend the ARRA premium subsidy. HCW will continue to monitor the legislative activity and notify you via Compliance Alert if a law is signed by President Obama extending the premium subsidy.
In the meantime, if you have any questions about the premium subsidy, please contact our office at 919-403-1986.
Important Notice: Hill, Chesson & Woody does not engage in the practice of law, accounting, or medicine. Therefore, the contents of this communication should not be regarded as a substitute for legal, tax, or medical advice.
December 3, 2009
Hill, Chesson & Woody Employee Benefit Services
194 Finley Golf Course Rd, Suite 200,
Chapel Hill, NC 27517
Phone: 919.403.1986
Fax: 919.869-2063
www.hcwbenefits.com