BENEFITS NOTEBOOK 

• It applies only to qualified beneficiaries who lost or lose coverage due to involuntary termination of employment (subject to the gross-misconduct exception, if the plan uses that exception) between September 1, 2008 and December 31, 2009 (so it may reduce future COBRA premiums for qualified beneficiaries already on continuation coverage). It appears that loss of coverage due to death or reduction in hours does not trigger the subsidy.
   
• The premium subsidy first applies to periods of coverage starting after the date President Obama signs the bill (so for March 2009 coverage, in most cases).
   
• The premium subsidy is available for up to nine months, but it doesn’t extend the COBRA continuation period, and the subsidy ends when the qualified beneficiary becomes eligible for (not necessarily covered by) Medicare or by another group health plan (other than a plan providing only ancillary coverage – dental or vision only – or a health FSA) or fails timely to pay his or her reduced share of the applicable premium. The subsidy may last beyond 2009, if the termination occurred during the relevant period. The qualified beneficiary is required to give notice in writing to the plan administrator of eligibility for other group coverage and may be subject to a penalty for failure to do so.
   
• The group health plan is obligated to decide whether the qualified beneficiary is eligible for the subsidy (including whether the termination was involuntary), subject to expedited review by the U.S. Department of Labor of any denial of eligibility.
   
• The premium subsidy is even available for non-COBRA continuation coverage attributable to an involuntary termination of employment during the relevant period, such as Oregon’s six-month continuation for Oregon-insured small-employer plans and our super-continuation rights for early retirees from Oregon public employers.
   
• The subsidy is available for COBRA coverage under health plans other than basic medical plans, but not health FSAs. So if the employee were covered by medical, dental and vision plans, with a combined premium for active employee-only coverage of $600 per month and a COBRA applicable premium of $612 per month, an eligible qualified beneficiary could continue all three coverages for March 2009 and thereafter by paying $214.20 per month.
   
• The employer is permitted, but not required, to offer eligible qualified beneficiaries a 90-day window in which to elect to continue coverage in a different, less expensive group health plan that is not a health FSA or a plan providing only ancillary coverages.
   
• The employer obtains reimbursement for its payment of the remainder of the continuation coverage premium when it submits IRS Form 941 for discounted premiums it receives from eligible qualified beneficiaries, apparently regardless of when the employer makes up the difference between the qualified beneficiary’s payment and the full applicable premium.
   
• The subsidy is not available if the employer pays the qualified beneficiary’s share of the applicable premium.
   
• The subsidy is not taxable income to the qualified beneficiary or reportable as such by the employer, nor is the subsidy income for purposes of entitlement to public benefits.
   
• The premium subsidy is available to each affected qualified beneficiary and not limited to the terminated employee, nor is it dependent on the terminated employee electing or retaining continuation coverage.
   
• A qualified beneficiary with adjusted gross income above $125,000 ($250,000 for joint filers) for a year in which the beneficiary receives a premium subsidy is subject to an additional tax to recoup the subsidy. The tax is phased in between $125,000 and $145,000 of adjusted gross income ($250,000 - $290,000 for joint filers).
   
• Plan administrators must give eligible qualified beneficiaries notice of the availability of the premium subsidy, as well as the requirement that qualified beneficiaries give timely written notice of the availability of other coverage that may cut off the premium subsidy. The notice must include the forms necessary to establish eligibility for the premium subsidy and the name, address and telephone number of the plan’s contact person.

• Plan administrators must give eligible individuals notice of the new or extended election window, which must last 60 days from the date of the notice. (So a qualified beneficiary, Ann, whose employment was involuntarily terminated in September 2008 and did not elect COBRA coverage, would have to be offered such coverage again, and the election period for a qualified beneficiary whose employment was involuntarily terminated in December 2008 and has not yet elected COBRA coverage would have to be extended.) The DOL is to prepare a model notice.
   
• COBRA coverage elected during the special election period begins on the first coverage period after President Obama signs the bill (presumably March 2009) and does not extend the maximum COBRA continuation period based on the original qualifying event. (So the maximum COBRA continuation period for qualified beneficiary Ann, described above, would normally end on February 28, 2010, though Ann did not have continuation coverage from October 2008 through February 2009.
   
• If a qualified beneficiary elects COBRA coverage during the special election period, any gap in coverage between the date of the qualifying event and March 1, 2009 is disregarded for purposes of applying any preexisting-condition limit to the qualified beneficiary.
   
• The special election period, unlike the premium subsidy, appears to apply only to COBRA coverage and not to other forms of continuation coverage, such as state-mandated coverage.

• Consider whether to offer eligible qualified beneficiaries alternate continuation coverage under a plan less expensive than the actual COBRA plan.
   
• Prepare and circulate notices announcing the premium subsidy (and providing the related information described above).
   
• Identify the qualified beneficiaries eligible for the special election window and prepare and circulate a notice offering them COBRA coverage, including the premium subsidy.
   
• Consider how the premium subsidy might facilitate separation agreements or reductions in force and whether severance pay plans should be amended, since employer-subsidized continuation coverage is not eligible for the subsidy.
   
• Self-insured employers might revisit their determination of the COBRA applicable premium, since the premium subsidy is likely to increase IRS scrutiny of the applicable premium.
   
• Employers’ benefits and payroll professionals will want to coordinate to ensure the employer gets timely credit against its federal payroll taxes for its subsidized COBRA premiums.