In conjunction with the COBRA subsidy application (the Request for Treatment as a Subsidy Eligible Individual), there is a mechanism that was created to appeal the denial of the subsidy directly to the United States Department of Labor.  The link for DOL website for making an appeal is here.

The appeal can be made on-line, or can be submitted via paper to the DOL.  the notice included with the application confirms that to be eligible for the subsidy, an employee must (1) be eligible for COBRA between 9/1/08 and 12/31/09, (2) elect coverage and (3) have a qualifying event involving an involuntary termination.  While the statutory creation of the appeal process seems to require a ruling within 15 days, nothing in this form references that specific time frame.

From an employers perspective, nothing in the notice defines how the appeal review will be conducted.  The employee seeking to appeal the determination is asked to submit documentation that will be reviewed, but there is no commitment that the DOL will contact the employer or plan administrator for further clarification.  It remains to be seen how they will be contacted, but it is safe to assume they will be contacted to verify the information submitted by the employee on appeal.

I think that initially, employers should work with their legal counsel if they are notified of an appeal (or receive an inquiry about a denial of the subsidy) simply to control the process so that it does not broaden in scope into a deeper "employee benefits" audit by the DOL.  I believe it is likely that this type of appeal and investigation will give the DOL the opportunity to identify potential problem employers or plans to conduct a more thorough investigation of their plan administration.  Employers will also want to be very careful about their responses to an investigation as they could be considered admissions to the DOL of faulty employment practices that could give rise to a DOL or EEOC investigation.  In sum, employers should not assume the DOL is just interested in dealing with the appeal and should be very careful about how they respond.  I am not suggesting the DOL is the "enemy,"  but employers should be careful if contacted.