LAW ALERT: The IRS Provides Guidance On The New 65% COBRA Subsidy Obligation

Download: Legal Alert and Notice 2009-27.pdf

The IRS has issued Notice 2009-27 which provides a thorough interpretation of Section 2001 of the American Recovery and Reinvestment Act of 2009 (“ARRA”) relating to premium assistance for COBRA continuation coverage.

Notice 2009-27 provides information in a question and answer format regarding various parts of the ARRA like:

  1. What does “involuntary termination” mean?
  2. Who is an “assistance eligible” individual?
  3. How are premium reductions (or subsidies) calculated?
  4. What plans are subject to the COBRA subsidy?
  5. When does the premium reduction/subsidy apply?
  6. How does the “extended” (or “second chance”) election opportunity work?

While lengthy, Notice 2009-27 provides helpful guidance and examples for employers trying to understand and comply with this new COBRA subsidy obligation. We are attaching a copy of the Notice and recommend that employers read it and contact their legal counsel with any questions.

Lizbeth “Beth” West is a shareholder in the Labor and Employment Law Section and Disputes, Trials & Appeals Section at Weintraub Genshlea Chediak. Beth’s practice focuses on counseling employers in all areas of employment law, and defending employers in state and federal court, as well as before administrative agencies. She has extensive experience in defending wage and hour claims, and complex whistle-blowing and retaliation claims. She also provides training services on various employment issues, such as sexual harassment and violence in the workplace. If you have any questions about this Legal Alert or other employment law related questions, please feel free to contact Beth West at (916) 558-6082. For additional articles on employment law issues, please visit Weintraub’s law blog at