If you have fired or laid off an employee since September 2008, you know about the group health insurance continuance provisions related to COBRA that allow an employee to only pay 35% of the premiums due, while the federal government subsidizes the rest of the premium. That subsidy was supposed to expire at the end of 2009, so that employees laid off after that date would not receive the subsidy. In addition, the subsidy was only supposed to cover the first 9 months after the employee lost his job.

On December 21, 2009, President Obama signed a COBRA subsidy extension that extends the expiration date to February 28, 2010. What that means is that if you involuntarily terminate the employment of one of your workers in the next two months, that employee will also be eligible for the COBRA subsidy.

Even more important, the new legislation extends the subsidy for 15 months rather than just 9 months after the employee loses his job. And yes it is retroactive, meaning that any employee who has used up the 9 months is eligible to receive 6 more months of subsidies and a refund of overpayments.

By February 19, you have to send out written notices of this opportunity to any employee who was involuntarily terminated on or after October 31, 2009. You also have to send notices to anyone who stopped paying COBRA premiums after 9 months or anyone who overpaid by continuing their premiums after the 9 month subsidy expired. So it is best to go back and review the COBRA files for any employee involuntarily terminated since September 30, 2008.

Your group health insurance agent should be able to help you with the required notice language and information on who has been receiving COBRA continuation coverage and for how long. Just don’t ignore this issue. You only have 60 days to get your paperwork in order and start paying subsidies to be reimbursed by the federal government through your payroll taxes.