In a speech to the American Bar Association, Kevin Knopf, attorney-advisor, Treasury Office of Benefits Tax Counsel, said that Treasury is working on a notice to help plan sponsors define the term “involuntary termination,” establishing one of the keys to eligibility for the nine-month premium subsidy under COBRA.

In the American Recovery and Reinvestment Act of 2009 (ARRA), employees involuntarily terminated between September 1, 2008 and December 31, 2009 may be eligible for a 65 percent premium subsidy from the federal government.

While the House Ways and Means Committee has already informally said that death is not considered involuntary termination for premium subsidy purposes, there are many other COBRA qualifying events that are causing some question in the minds of plan sponsors.  Is a termination in anticipation of layoff a voluntary or involuntary termination?  What about the acceptance of a severance agreement?  Many commentators have also questioned whether a reduction-in-hours causing a loss of coverage (a COBRA qualifying event) is considered a “termination.”

Stay tuned for more information, hopefully within the next week or two.

The IRS has continued to update their Q&As on the new COBRA premium subsidy as provided by the American Recovery and Reinvestment Act of 2009.  A page that offers a number of Q&As by topics can be found here, while particularly helpful is the separate page of Administration and Eligibility Q&As found here.

Check back often (at least until April 18, 2009) to see new and updated Q&As.

And time to give the IRS credit…they are right on top of the questions asked by many employers and qualified beneficiaries

They waited until the very last minute (ARRA provided that Model Notices be provided by DOL no later than March 19th, 30 days after enactment, and that’s when they were provided).

Actually, DOL produced four model notices depending upon the type of Qualified Beneficiary.  Particular attention should be paid to DOL’s instruction that all qualified beneficiaries, regardless of qualifying event, must be provided with one or more notices.  Thus, plan sponsors may receive responses seeking the federal premium subsidy from individuals not qualified to receive it.  This undoubtedly may pose a confusing situation for many plan sponsors and qualified beneficiaries.

There is a full general notice is for plans subject to the Federal COBRA requirements that is to be provided to all Qualified Beneficaries (not just employees) who had or have a qualifying event between September 1, 2008 and December 31, 2009.  There is a second abbreviated general notice in lieu of the full version is for plans subject to the Federal COBRA requirements to send to individuals who experienced a qualifying event on or after September 1, 2008, have already elected COBRA coverage, and still have it in effect.   A third alternative notice is provided to insurance issuers for those plans that are not covered under Federal COBRA requirements but rather are covered under state continuation laws (often referred to as “mini-COBRA”).  Lastly, a fourth notice in connection with extended election periods is for plans subject to the Federal COBRA requirements who had any assistance eligible individuals (or any individual who would be an assistance eligible individual if a COBRA continuation election were in effect) who:

1. Had a qualifying event at any time from September 1, 2008 through February 16, 2009; and
2. Either did not elect COBRA continuation coverage, or who elected it but subsequently discontinued COBRA.

All affected plans now have until April 18, 2009 to review their notices against the model notices provided by DOL, make any adjustments necessary [or use the appropriate model notice(s)], and then distribute them to affected individuals.