Morgan Lewis

Stimulus Plan Requires Immediate COBRA Action

By Employee Benefits Practice

LawFlash/Client Alert

  • published on:

    02/17/2009

  • by:

    Employee Benefits Practice

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The American Recovery and Reinvestment Act of 2009 (the stimulus plan or the stimulus bill) that President Obama signed into law today contains, among other employee benefit changes, a series of new provisions temporarily modifying Consolidated Omnibus Budget Reconciliation Act (COBRA) group healthcare plan continuation rules. These provisions represent the most wide-ranging changes to COBRA since its inception and will require immediate action by employers and COBRA administrators.

The objective of these provisions is to provide a government subsidy which for nine months will cover 65% of the cost of COBRA coverage for assistance-eligible individuals whose employment is involuntarily terminated on and after September 1, 2008 and before January 1, 2010. This subsidy is generally tax-free to the assistance-eligible individual.

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