As the number of layoffs skyrocket, employers must be mindful of their changing legal obligations regarding terminated employees’ rights and benefits. The Consolidated Omnibus Budget Reconciliation Act (COBRA) already allowed terminated workers to continue participating in their employer’s health plan for 18 months (in most cases), at the employee’s own expense. Although COBRA has traditionally not placed a financial burden on employers, the recent economic stimulus plan known as the American Recovery Reinvestment Act of 2009 (ARRA) now requires employers to pay up to 65% of the terminated employee’s premium payments for up to 9 months. Employers may take a payroll tax credit for the subsidies.
Federal COBRA laws affects employers with more than 20 employees, however a New York law known as “mini-Cobra” provides similar health insurance continuation benefits to those employees terminated from employers with fewer than 20 employees. Likewise, the subsidy obligation and tax credit are also applicable to the smaller employers covered by the mini-Cobra.
For employees to qualify for this subsidy, they must have been involuntarily terminated from their job between September 1, 2008 and December 31, 2009, and must be otherwise eligible for COBRA. The workers must have a household income below certain thresholds.
The law also provides a special election period for employees who were terminated between September 1, 2008 and February 17, 2009, before the ARRA was enacted. Individuals who were terminated during this period and had the opportunity to elect COBRA but did not, must be given a second opportunity to do so.
Employers must notify employees and former employees who may qualify for the subsidy the change in the law no later than April 18, 2009. The United States Department of Labor has provided notice forms, which employers can use.
Ellen R. Storch is an employment attorney with the firm Kaufman Dolowich Voluck & Gonzo LLP. Contact her at firstname.lastname@example.org for suggestions or questions about this column.