While Congress has not yet determined to extend the COBRA subsidy further, one of the first court decisions dealing with subsidies, and more importantly, a denial of subsidy, has been decided.  Dorsey v. Jacobson Holman, from the DC district court deals with denial of the COBRA subsidy.

Dorsey applied for the COBRA subsidy and her employer denied the subsidy application saying she voluntarily terminated.  Dorsey did not return from an FMLA leave of absence.  After checking with the DOL, Dorsey informed her employer that the DOL considered the termination to be involuntary.  In fact, the DOL representative also contacted the employer and told them so.  But Dorsey did not actually file an appeal with the DOL.  Instead, she filed this lawsuit.

The Court dismissed the lawsuit finding that Dorsey had failed to exhaust administrative remedies, which is generally a precursor to filing a case under ERISA.  The court decided that since the ARRA provides a specific appeals process, that appeals process has to be exhausted before a suit can be brought.

This decision does not necessarily result in the employer avoiding the subsidy, but it does provide some guidance and assurance to plan sponsors that the subsidy process is tied into and consistent with the normal components of plan administration.  It appears that ERISA protections and responsibilities will apply.  Thanks to Susan Jordan, a partner in our Pittsburgh office, for bringing this to my attention.