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Employment Resources


By April 1, 2010No Comments

Congress has extended for a second time the COBRA subsidy eligibility period under The American Recovery and Reinvestment Act of 2009 (ARRA). Signed March 2, the Temporary Extension Act (TEA) extends ARRA an additional 30 days to March 31, 2010. It also makes the 65% subsidy available to eligible individuals who first experience a reduction in hours followed by an involuntary termination. Previously individuals who had their hours reduced and were later involuntarily terminated were not eligible for the subsidy.

If an individual is involuntarily terminated during March 2010, the employer will now need to determine whether their hours were reduced all the way back to September 2008 and whether they were offered COBRA at that time. If the individual did not elect COBRA after their original reduction in hours, they will be given another option to elect COBRA as of their involuntary termination date, if they are eligible for the subsidy; any gap in coverage would be disregarded for pre-existing conditions and no catch-up premiums would be required.

Summary of new provision:

  • If an individual’s COBRA qualifying event is an involuntary termination of employment during March 2010, normal COBRA procedures will apply.
  • If an individual had a reduction in hours later followed by an involuntary termination and the individual elected COBRA immediately following the reduction in hours, no additional COBRA election period is required.
  • If an individual had a reduction in hours and did not elect COBRA (or elected coverage but later dropped it) and is involuntarily terminated between March 2, 2010 and March 31, 2010, the involuntary termination is considered a new “qualifying event”� and will trigger an additional round of COBRA notices for employers (or their administrators). However, irrespective of the new qualifying event, the maximum period of COBRA coverage (usually 18 months) will be applied from the original reduction of hours date, not upon involuntary termination.

As an example, an individual has a reduction in hours on September 30, 2009, triggering COBRA eligibility on October 1, 2009. She fails to elect COBRA within the required timelines, and is later involuntarily terminated on March 10, 2010. In this example, March 10th is deemed to be a new qualifying event, triggering a new round of COBRA eligibility. However, the employee’s general COBRA eligibility period will have commenced on and date back to October 1, 2009.

Next Steps

  1. Employers will need to comply with these changes and notify effected individuals immediately.
  2. Employers should keep track of individuals who are eligible for COBRA due to a reduction in hours so that appropriate notices can be delivered if those individuals are later involuntarily terminated during March 2010.
  3. Employers should continue to track these employees because it’s highly likely the COBRA subsidy will be extended again.