LAW ALERT: COBRA Subsidy Is Extended By President Obama

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President Obama signed the “Fiscal Year 2010 Defense Appropriations Act” (“DAA”) on December 21, 2009. The DAA provides two important changes to the COBRA subsidy that was established under the “American Recovery and Reinvestment Act of 2009” (“ARRA”) earlier this year.

The COBRA subsidy provisions under the ARRA provide that eligible employees (those who are “involuntarily terminated” within the stated period) pay 35% of the premium costs and employers pay the other 65%. The employer can then file for a federal tax credit for the premium subsidy it pays.

The important changes made by the DAA are:

1. Employees who are involuntarily terminated at any time prior to February 28, 2010 (rather than December 31, 2009) may be eligible for the subsidy; and

2. The maximum period an eligible employee may receive the subsidy is fifteen (15) months rather than nine (9) months.

Employees who reached the end of the original nine (9) month period before the enactment of the DAA, have sixty (60) days from the enactment date to pay their portion of any missed premiums, or thirty (30) days after receipt of a notice of extension from the health plan administrator, whichever is later.

The DAA requires that employers notify current and future COBRA beneficiaries of the new fifteen (15) month premium subsidy period within sixty (60) days from enactment (by February 17, 2010) unless an individual’s COBRA “qualifying event” occurs after December 19, 2009 in which case the notice must be sent pursuant to the general time requirements under COBRA. It also permits employers to offset future COBRA premiums or issue a refund check to beneficiaries who overpaid their COBRA premiums because they paid the entire amount without any subsidy.

The DAA also clarifies that an employee’s or beneficiary’s eligibility for COBRA need not occur before February 28, 2010 in order for the individual to be eligible for the subsidy. Rather, it is the COBRA “qualifying event” (“involuntary termination” of an employee) that must occur on or before February 28, 2010.


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