Any employer which maintains a group health plan must be aware of the following changes in COBRA as a result of the passage of the American Recovery and Reinvestment Act of 2009 ("Act") on February 17, 2009.
Premium Subsidies
If an employee is involuntarily terminated from employment between September 1, 2008 and December 31, 2009 the employee (and eligible dependents) covered under a group health plan which is subject to Federal COBRA or comparable state continuation coverage rules, may elect COBRA and receive a 65% subsidy of the applicable COBRA premium.
-
If the employee is covered by a single employer group health plan, his or her employer will pay the 65% subsidy and claim a credit against its liability for payroll taxes deposited with the Internal Revenue Service or claim as an overpayment on the employer’s Form 941. To claim the credit the employer must maintain the following supporting documentation:
- Information on the receipt, including dates and amounts, of the employee’s 35% share of the premium;
- If the employer maintains an insured plan, a copy of invoice or other supporting statements from the insurance carrier and proof of timely payment of the full premium to the insurance carrier required under COBRA;
- If the employer maintains a self insured plan, proof of the premium amount and proof of the coverage provided to the eligible employee;
- Attestation of involuntary termination from employment, including the date of the involuntary termination, for the eligible employee;
- Proof of the eligible individual’s eligibility for COBRA coverage and election of COBRA coverage; and
- A record of the Social Security Number of the covered employee, the amount of the subsidy reimbursed with respect to the covered employee and whether the subsidy was for an individual or two or more individuals.
-
If the employee is covered by a multi-employer group health plan, the plan will be responsible for the 65% subsidy and claim a credit against its payroll taxes or receive a refund from the Internal Revenue Service, if the plan’s subsidy payments exceed its payroll tax liability.
-
If the employer is a small employer (less than 20 employees) or is not otherwise subject to Federal COBRA, but subject to state law continuation rules, an involuntarily terminated employee may be eligible for the subsidy, however the law provides that the subsidy will be advanced by the insurer rather than the employer.
|
Duration of Subsidy
- The premium subsidy ends when the employee becomes eligible for coverage for Medicare or another group health plan (including coverage available through the employee’s spouse) or when COBRA coverage ends, whichever is first
Miscellaneous COBRA Provisions
- Premium subsidies are tax free to employees.
-
Single taxpayers with modified adjusted gross income in excess of $125,000 and married taxpayers with modified adjusted gross income in excess of $250,000 are generally ineligible for the tax free subsidy, though generally it appears it is the employee’s and not the employer’s responsibility to monitor these income limitations.
- If an employer has a plan with different benefit options, an employer may permit an eligible individual to elect a benefit coverage option which is different from the coverage in effect at the time of involuntary termination of employment. This provision is designed to encourage employees to elect a less expensive benefit coverage option when electing COBRA
Actions Steps for Employer
-
For an employee who involuntarily terminated on or after September 1, 2008 and who is currently on COBRA as of February 17, 2009, the employer must provide a notice describing the premium subsidy.
-
For an employee who involuntarily terminated on or after September 1, 2008 and who is not currently on COBRA, provide a notice of this special COBRA election right and a notice describing the premium subsidy. The notice of special COBRA election right must be provided no later than April 18, 2009.
-
Employees who worked for employers not subject to Federal COBRA, but subject to state continuation coverage, are not entitled to receive the notice of special COBRA election right, but must receive the notice describing the premium subsidy.
-
Consider whether to offer employees eligible for the COBRA subsidy the option to elect an alternative benefit option as part of his or her COBRA election. Alternative benefit options will generally be less expensive options, which can be coupled with the premium subsidy, to make COBRA more affordable for the electing employee.
- Revise existing COBRA forms.
|
