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Structure of Firm Severance Package Can Result in Loss of Federal Health Subsidy

By Stuart Sirkin
April 27, 2009

The ABA Journal recently reported that at least 3,500 attorneys and staff ' “and perhaps significantly more” ' lost their jobs in March. (Neil, Marth. “March Mayhem Tally Tops 3,500 After End-of-Month Law Firm Layoffs.” Available at www.abajournal.com/weekly. Posted on March 31, 2009.) That follows reports of at least 2,100 layoffs in February and 1,500 in January. And there are no doubt more to come as law firms continue to assess how to deal with the current economic situation.

Virtually all of these laid-off workers are eligible both for COBRA continuation health care and the new federal subsidy to pay for such coverage. But in an ironic twist, the more generous the firm's severance package with respect to subsidizing COBRA continuation coverage, the less generous the federal subsidy. As a result, firms may want to reconsider the structure of their severance packages.

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