The document provides information about COBRA subsidy recipients and retiree health coverage. It reminds COBRA subsidy recipients that they must notify their plan in writing if they become eligible for other coverage like a new job or Medicare to avoid penalties. It also notes that plans must offer COBRA at retirement if the active and retiree plans differ, but not if they are the same. Dependents may get COBRA if losing retiree coverage due to an event like a retiree's death.

1. BENEFITS UPDATE
WEEK OF AUGUST 24, 2009
Reminder That COBRA Subsidy Recipients
Must Notify Plan of Other Coverage
The IRS has posted on its website a reminder that COBRA subsidy recipients who later become eligible
for other group health plan coverage or Medicare should notify their plan in writing that they are no longer
eligible for the subsidy. The IRS webpage explains that if an individual continues to receive the subsidy
after he or she is eligible for certain other coverage, such as group health coverage from a new job or
Medicare, the individual may be subject to a penalty of 110% of the subsidy provided after he or she
became eligible for the other coverage. The reminder includes instructions for individuals to self-report to
the IRS that they are subject to the penalty.
The IRS also notes that anyone who suspects that someone may be receiving the subsidy after becoming
eligible for other coverage may report this to the IRS by completing Form 3949-A (Information Referral).
The DOL notice that group health plans were required to send to individuals advising them of their right to
subsidized COBRA premium payments includes the form individuals should use to notify the plan that
they are eligible for other group health plan coverage or Medicare.
Visit the webpage at: http://www.irs.gov/businesses/small/article/0,,id=212421,00.html
Interaction Between COBRA and Retiree Health Coverage
Strange things often happen when COBRA is involved. The interaction between COBRA and retiree
health coverage is no exception. Generally, this is how it works:
If the active employee and retiree health plans are separate or if they are the same, but the terms are
different for each group, the employer must offer COBRA coverage at the time of retirement. If a person
elects retiree health coverage (even if the retiree health coverage only lasts 12 months, for example),
when retiree coverage expires, COBRA coverage is not offered. There is an exception for dependents,
however, if their retiree health coverage is terminated due to a qualifying event. In this case, they are
entitled to COBRA coverage from the date of the qualifying event. For example, a retiree and his wife are
covered under the retiree health plan. The retiree dies after having been covered 10 months and the wife
is no longer eligible. The wife is entitled to 36 months of COBRA coverage from the date of death.
However, if the plan is set up so that she would remain on the plan regardless of her husband's death,
COBRA would not rear its ugly head again.
On the other hand, if the plan, benefits, and premiums are the same for active employees and retirees,
COBRA does not have to be offered at the time of retirement as there has been no loss of coverage
giving rise to a qualifying event. At the end of retiree health coverage when COBRA coverage was not
previously offered, COBRA coverage must be offered if the maximum COBRA coverage period has not
expired. So, for example, if the retiree coverage lasted 12 months, COBRA coverage should be extended
for 6 months (18 minus 12 months).
This Benefits Update is intended to convey general information and may not take into account all the
circumstances relevant to a particular person’s situation.