The Internal Revenue Service recently released an advance copy of Notice 2009-27, Premium assistance for COBRA benefits. Pursuant to the American Recovery and Reinvestment Act of 2009 or ARRA, certain involuntarily terminated employees are eligible for employer-provided subsidies to help pay for their Consolidated Omnibus Budget Reconciliation Act (COBRA) continuation coverage. Employers may then claim a credit on their Form 941 to be reimbursed for the assistance provided. Vision Payroll provided an overview of Notice 2009-27 when it was first issued. Today we will be reviewing Extended Election Period under Notice 2009-27. Most of the issues covered in this topic unless otherwise indicated “apply only for purposes of Federal COBRA and temporary continuation coverage under” Federal Employees Health Benefits Program (FEHBP).

Employees who elected self-only coverage and were involuntarily terminated after August 31, 2008 and before February 18, 2009 are allowed an extended election period to elect coverage for a spouse and dependent children who are qualified beneficiaries and eligible for premium reduction.

COBRA continuation coverage begins with the first period of coverage after February 16, 2009 for coverage elected during the extended election period. For plans that require coverage to be paid for on a calendar month, March 2009 is the first period of coverage eligible for premium reduction. This is true even if the plan requires employees to pay a pro-rata portion of the February 2009 premium. If, however, the plan requires coverage to be paid for on a monthly period based on the last day of coverage, the first period of coverage could be different. Assuming the last day of coverage were October 3, 2008, the first period the employee would be required to pay for would be October 4, 2008 through November 3, 2008. The first period of coverage beginning after February 16, 2009 would be March 4, 2009 through April 3, 2009.

Employees who still had open COBRA elections as of February 17, 2009 may forego coverage under the initial election and elect only under the extended election period. Employees who do so need pay for COBRA continuation coverage for coverage periods after February 16, 2009. Employees who elect under their original COBRA election period would only be eligible for premium reduction for periods of coverage after February 16, 2009.

For most purposes, the extended election period is available only to plans subject to Federal COBRA or FEHBP. The extended election period does not apply to state plans that provide comparable coverage. State programs that allow a similar extended election would result in premium reduction for assistance eligible individuals (AEIs).

Qualified beneficiaries with health reimbursement arrangement (HRA) coverage “have access to the same level of COBRA continuation coverage as was available immediately before the qualifying event.”

AEIs that were eligible for other group coverage before February 17, 2009 but unable to enroll in group health coverage after February 16, 2009 are eligible for the premium reduction until they are eligible to enroll in another plan or until the premium reduction period ends.

A plan cannot require payment of the initial premium under the extended election period coverage “earlier than 45 days after the date on which the election of Federal COBRA under the extended election period is made for that qualified beneficiary.”

The next topic covered will be Payments to Insurers under Federal COBRA. Contact Vision Payroll if you have any questions on Notice 2009-27.