WASHINGTON—Senate Democratic leaders unveiled a revamped tax bill Tuesday that, like a House-passed measure, omits an extension of federal COBRA premium subsidies for laid-off employees.

In March, the Senate approved a tax bill, H.R. 4213, extending the subsidy to employees laid off through year-end. But the House in May stripped the COBRA subsidy and its projected $8 billion cost from the measure before passing it and sending the bill back to the Senate.

 While Senate Democratic leaders had discussed reducing the extension to Nov. 30, the latest Senate version that Finance Committee Chairman Max Baucus, D-Mont., unveiled Tuesday did not mention the subsidy.

 While the tax bill could be amended on the Senate floor to include a shorter extension, legislators have grown more leery of approving measures that would boost the federal deficit, and even a short extension would face an uphill battle, observers say.

 The Senate measure also, like the House bill, would give employers more time to fund their pension plans.

For assistance with your questions about COBRA and the ARRA Premium Subsidy Expiration, call us at 800-499-3539 or email us at CobraSupport@amben.com

Congress failed in its efforts before Memorial Day to pass a nearly $200 billion package that would have extended unemployment benefits and other expiring provisions, including ARRA’s COBRA subsidy program.   The 15 months of federally subsidized COBRA premiums for involuntary terminations of employment that needed to occur by May 31, 2010, came to an end.

As a result, individuals who are involuntarily laid off on or after June 1 are not eligible to receive the 65 percent COBRA premium subsidy and will have to bear the full cost of their COBRA coverage if they elect it. Those assistance-eligible individuals already receiving the premium reduction, and are eligible to continue to receive the subsidy for up to 15 months, are not affected.

“More than likely we will see another temporary measure in June,” said compliance manager Jim Trimble, with Ceridian’s Finance & Regulatory Management department. Congress is set to return from Memorial Day recess on June 7. Congress has extended the COBRA subsidy for unemployed workers three times since February 2009, when it was passed as a provision within the American Recovery and Reinvestment Act (ARRA). The last extension of the ARRA subsidy was passed in April.

Trimble noted that there are bills pending in Congress that would retroactively extend the subsidy. But the question is, How long will the program be extended? “The proposed extensions run from 14 days to 30 days to November 30, 2010, to the end of the year,” he said. “In any case, the duration of the available subsidy would remain 15 months, as under current law.”

Most recently, Democratic leaders in the U.S. House of Representatives released revisions to the substitute amendment to the American Jobs and Closing Tax Loopholes Act (H.R. 4213), which included an extension of the COBRA premium assistance program.  However, the House, in the bill it ultimately passed on May 28, struck the ARRA extension for COBRA. The Senate, on the other hand, is considering a 14-day extension, which it wouldn’t vote on until after the Memorial Day recess. And, considering the political climate in Washington, D.C., the measure would quite possibly expire before it was approved by the House and then enacted by the President. 

Although a popular provision, COBRA subsidy extensions have in the past been caught up in the politics over government spending. Many see the premium reduction program under ARRA being extended for as long as high unemployment rates continue. The program has been considered an essential lifeline for unemployed American families. The U.S. Department of Treasury reported recently that between one quarter and one third of eligible unemployed workers enrolled in subsidized COBRA for continuing health insurance. 

American Benefits will continue to monitor Congressional activities regarding the COBRA premium subsidy program. As circumstances change, we will keep you informed.

In the recently decided case of Dorsey v. Holman, 2010 U.S. Dist. LEXIS 41295 (D.D.C. Apr. 27, 2010) a Washington D.C. law firm terminated their employee, Debra Dorsey, after a year of disability-related leave. The employee elected COBRA in late 2008. Subsequently, the American Recovery and Reinvestment Act of 2008 (ARRA) was passed in February, 2009, and the employee made the request to her employer to be provided the subsidy following a conversation with a DOL official who confirmed her eligibility for the subsidy. The employer denied the request. It viewed the termination as voluntary because the employee failed to return after her FMLA leave expired. Even after a DOL representative called the employer and stated that the COBRA premium should be subsidized, the employer again denied the request.

U.S. District Judge Rosemary M. Collyer of the U.S. District Court for the District of Columbia dismissed the case, ruling that ARRA states that its COBRA-related provisions should be treated as though they are part of the Employee Retirement Income Security Act (ERISA). Collyer pointed out that the DOL has provided guidance on its web site and directs individuals denied the COBRA subsidy to complete an “Application for Review of Denial of COBRA Premium Reduction.” The DOL advises that the department will act on any application within 15 days of getting the document. It is significant to note that Debra Dorsey did not follow this process and instead sued her former employer. The conversations with DOL officials did not follow the DOL’s expedited review process. The court held that the DOL’s review process is required before a Qualified Beneficiary can sue over an ARRA subsidy denial.