Wednesday, March 11, 2009

Demystifying the COBRA subsidy

The federal stimulus package is called the American Recovery and Reinvestment Act. The Act allows qualified beneficiaries who are eligible for COBRA due to an involuntary termination to pay 35% of the cost of the COBRA coverage. The remaining 65% of the plan cost will be paid by the U.S. government. An employer gets reimbursed for the 65% of the plan cost when it files its 941 for payroll taxes. The subsidy eligibility ends on December 31, 2009.

The Act is retroactive in that the coverage applies to all employees involuntarily terminated from September 1, 2008, to February 16, 2009, and to their qualified beneficiaries, even if they did not elect COBRA coverage when it was offered to them. So, that means employers have to contact employees and beneficiaries terminated during that time frame by April 18, 2009 (60 days after the February 17, 2009 enactment date).

In addition to the regular COBRA notice, an employer should send a supplemental notice to affected individuals with additional information including, for example, information about the individual’s right to the subsidy and the conditions on the subsidy, a description of the obligation of the individual to notify the employer of eligibility under another group health plan or Medicare, and the penalty for failure to provide this notification. The DOL is required to provide a sample notification form by March 19, 2009.

Unfortunately, the Act does not define the term “involuntary termination”, so any involuntary termination is covered. Accordingly, employees who are terminated for poor performance, attendance problems, and other reasons appear to be eligible for the subsidy. Employees who are terminated for gross misconduct, however, are not covered, since a termination for gross misconduct is not a qualifying event under COBRA.

The subsidy is equal to 65% of the monthly COBRA premium for the qualified beneficiary for up to 9 months. The subsidy applies to medical, dental, and vision benefits. It does not apply to medical flexible reimbursement accounts. Employees and other qualified beneficiaries are required to pay the other 35% of the premium.

Tuesday, March 3, 2009

What's the Ledbetter Fair Pay Act?

A female employee is hired by an employer in 2009 and receives 24 paychecks, each reflecting a discriminatory pay practice by the employer because of his disability. How long of a period does the she have to file a complaint with the EEOC alleging pay discrimination under the Americans with Disabilities Act?

The answer is governed by Lilly Ledbetter Fair Pay Act of 2009, Public Law No. 111-2, 123 Stat. 5. The Ledbetter Act was drafted to overturn the Supreme Court's May 2007 decision in Ledbetter v. Goodyear Tire & Rubber Co.

The new law adds a provision to Title VII, which provides:

"unlawful employment practice occurs, with respect to discrimination in compensation in violation of this title, when a discriminatory compensation decision or other practice is adopted, when an individual becomes subject to a discriminatory compensation decision or other practice, or when an individual is affected by application of a discriminatory compensation decision or other practice, including each time wages, benefits, or other compensation is paid, resulting in whole or in part from such a decision or other practice."

So, the law treats each and every discriminatory paycheck as a new discrimination, thus re-starting the 180-day clock (300 days if the charge is also covered by state or local fair employment laws).