With the unemployment rate continuing to climb, the American Recovery and Reinvestment Act of 2009 (the "Act') signed by President Obama last February continues to be very relevant for unemployed workers. Specifically, I am referring to that part of the Act's economic stimulus measures that include a temporary COBRA premium subsidy.
The COBRA premium subsidy provides assistance for eligible unemployed workers. Briefly stated, eligible employees are those that are (a) involuntarily terminated (b) between September 1, 2008 and December 31, 2009, and (c) have gross incomes of less than $145,000 per year ($290,000 for joint filers). Employees with gross incomes of between $125,000 and $145,000 are eligible, but they will have to repay the premium, which is effectuated through an increase in the person's income tax liability. The subsidy is 65% of the premium amount, and is for a period of up to nine months.
Employees whose job is involuntarily terminated, and who meet the eligibility criteria should look into this very significant benefit. But, a word of caution: If the employee is offered a severance package, and the severance agreement that typically accompanies such a severance offer contains a general waiver provision, that provision may affect the employee's capacity to commence legal action to enforce his or her rights under COBRA and the Act in the event that the rights are denied.
Whether or not the waiver affects those rights involves a complicated, fact-specific analysis. It is best to have the severance agreement carefully reviewed by legal counsel before signing.
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