The 2010 DOD Act extends the eligibility period for the COBRA premium reduction for an additional two months (through 2-28-10) and the maximum period for receiving the subsidy for an additional six months (from nine to 15 months).

TEA signed on March 2 extends involuntary terminations through March 31, 2010.

This measure also created a new class of eligible individuals for the subsidy. It provides COBRA and subsidy eligibility for those employees who first lost health plan coverage due to a reduction in hours and then were involuntarily terminated after the date of the act's effective date. The involuntary termination of employment for those employees who were previously covered but lost coverage due to a reduction in hours is now a qualifying event, and that reduction of hours is now the start of a person’s COBRA coverage eligibility, not the involuntary termination. The COBRA coverage period is measured from the date of the reduction of hours, but premiums do not have to be paid for COBRA coverage between the reduction of hours and the involuntary termination.  Notices will have to be provided to eligible individuals within 60 days of the date of involuntary termination date with information regarding this extension and special COBRA enrollment period. The new change to the law does not impact the length of the subsidy, which remains at 15 months. For more information, visit the DOL's website.

http://www.dol.gov/ebsa/newsroom/fsCOBRApremiumreduction.html  

H.R. 4851 was signed by President Obama on April 15. It extends premium assistance to involuntary terminations through May 31, 2010

see here for the latest changes http://www.savoyassociates.com/NewsDetailPremium.aspx?id=2787

The DOL Fact Sheet regarding the 2010 DOD extension states:

"Individuals who had reached the end of the reduced premium period before the legislation extended it to 15 months will have additional time to pay the reduced premiums related to the extension. To continue their coverage they must pay the 35% of premium costs by February 17, 2010 (within 60 days of the enactment date of December 19, 2009) or within 30 days of when the extension notice is provided (postmarked) by their plan administrator."

The Act further makes a technical correction stating the eligibility for the subsidy is based on timing of the Qualifying Event, the involuntary termination, not the date of eligibility for COBRA or state continuation.

Example: an individual involuntarily terminated February 1, 2010 but covered through February 28 is still eligible for the subsidy although the continuation eligibility date is March 1, 2010.

Notices can be found here: http://www.dol.gov/ebsa/COBRAmodelnotice.html.

Below were the eligibility rules under The American Recovery & Reinvestment Act of 2009 signed February 17, 2009.

• Employees who were involuntarily terminated between September 1, 2008 and December 2009 may receive a subsidy and will pay 35% of the continuation premium for a maximum of 9 months per event.  Note that the termination date and the eligibility date MUST occur prior to January 1, 2010 which means that if the member is covered through December 31, they are NOT eligible for the ARRA subsidy.
• The subsidy ends if  1- the Assistance Eligible Individual becomes eligible for any other group health plan, Note: eligibility for coverage by TRICARE does not end the individual's of premium subsidy (clarified by IRS on 6-4-2009) 2-becomes eligible for Medicare, or 3- 18 months from the original termination date has expired. Each termination event would qualify the AEI for a 9 month subsidy. The terminations must occur before Jan 1, 2010.
  Example: Involuntarily terminated (IT’d) October 1, 2008. Subsidy starts March 1, 2009.  Person gets a job w/ benefits May 1, 2009.  Person is laid off October 1, 2009. They are once again eligible for a full 9 months subsidy even though they used 2 months (March and April 2009). This is assuming the income is below $125k and s/he is not eligible for any other group plan or Medicare.
• Employers in groups subject to Federal COBRA may permit the AEI to switch to a plan of same or lesser premium that is also available to active at work employees.
• For groups subject to Federal COBRA, the employer pays 65% and is reimbursed via payroll taxes on Form 941.  Under state continuation plans, the carrier pays the 65% and is reimbursed via its payroll taxes.  See here for full details http://www.savoyassociates.com/NewsDetail.aspx?id=2019
• Involuntary termination is an employer initiated termination for other than gross misconduct. A reduction of hours may be defined as involuntary if the employee subsequently terminates employment. Treasury recommends that the employer err on the side of caution and subsidize if in doubt.

From IRS Notice 2009-27

• A severance due to the independent exercise of the authority of the employer, other than the employee’s explicit request
  May include the employer’s failure to renew a contract if the employee was willing and able to execute a new contract.
• A reduction of hours in itself is not an IT, HOWEVER, the employee’s resulting termination may be IT.
• Retirement is not an IT. However, if absent retirement, the employer would have terminated the employee, it is IT.
• Clarified 6-4-2009 that an Involuntary Termination includes when a member of a military Reserve unit or the National Guard is called to active duty, regardless of whether the civilian employer otherwise treats the employee's absence as a termination of employment or a leave of absence.
• Clarified 6-4-2009 that if an employer determines that an employee's termination was involuntary for purposes of claiming the payroll tax credit, the IRS will not challenge that determination so long as it is consistent with a "reasonable interpretation of the applicable statutory provisions and IRS guidance." The IRS Q&A adds that the employer is required to maintain supporting documentation of its determination that the employee's termination of employment was involuntary, which should include an attestation by the employer of the employee's involuntary termination.