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New COBRA Premium Subsidies: Employers Must Notify Ex-Employees

The American Recovery and Reinvestment Act of 2009 (ARRA) added important COBRA benefits for laid off workers. Instead of the ex-employee needing to pay the full cost of COBRA coverage, now, the federal government will now subsidize 65% of COBRA premiums for up to nine months. By April 18, employers must notify some previously laid off employees of their potential COBRA premium reduction.

Under ARRA, individuals involuntarily terminated between last September 1 and the end of this year may qualify to pay only 35% of the cost of COBRA coverage. The remaining 65% is to be covered by employers, who then can claim the amount covered as a rebate on their 2009 income tax return.

Employers are required to notify COBRA eligible beneficiaries regarding possible premium reduction, whether or not they are currently enrolled in COBRA coverage.

As reported by the San Francisco Chronicle, those who previously declined COBRA coverage will also have another chance to enroll. By April 18, employers must provide notice of the premium reduction plan to employees who were let go between September 1, 2008 and February 16, 2009 and who either declined or are no longer enrolled in COBRA coverage.

To assist employers, the Department of Labor released model notices of the ARRA COBRA reduction benefits.