Federal requirements that employers pay for a portion of COBRA health benefits have been extended through March 31, 2010. The act that extended the COBRA premium reduction eligibility period to March 31, 2010, also expanded eligibility to any employee whose reduction of hours causes a loss of health coverage and who is then terminated on or after March 2, 2010, through March 31, 2010. This expansion also allows individuals whose reduction in hours caused a loss of health coverage and were later terminated, to sign up for continuation of health coverage under COBRA and receive the subsidy from the city, if the individuals did not elect COBRA continuation coverage when it was first offered or elected but subsequently discontinued COBRA. In the past, a city was not responsible for paying for that continued health coverage under COBRA, but could do so if it chose to. However, a new law, passed as part of last yearÂ’s federal stimulus package, requires cities to pay 65 percent of the cost of the continued health benefits if an employee is involuntarily terminated for a reason other than misconduct. The city is then reimbursed for the payment through its payroll taxes.

For more information, go to This topic is also discussed in the Legal Q&A section of the February issue of Texas Town & City magazine.

Contact Laura Mueller at the TML Legal Department with questions at (512) 231-7400 or

TML member cities may use the material herein for any purpose.
No other person or entity may reproduce, duplicate, or distribute any part of this document without the written authorization of the
Texas Municipal League.

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