COBRA Alert – Take Steps Now

The American Recovery and Reinvestment Act of 2009 (ARRA), the financial stimulus law signed by President Barack Obama on Feb. 17, 2009, includes significant changes to the COBRA continuation coverage rules. (Read more at the Department of Labor).

Here are the main points to the ARRA that you need to be aware of:

1. Workers who became jobless as early from Sept. 1, 2008 to December 31, 2009 are eligible to receive benefits under the law.
2. If a worker rejected COBRA coverage after Sept. 1, 2008, they can reconsider now.
3. Taxpayers with modified adjusted gross income exceeding $145,000, or $290,000 for those filing joint returns, do not qualify for the subsidy.
4. COBRA continuation coverage premiums will get a 65% federal government subsidy.
5. Employers will pay the 65% upfront, and then deduct these costs from Social Security and Medicare taxes. (IRS Tax Refund FAQ).
6. The subsidies will be paid for a maximum of nine months.
7. Subsidies begin March 1, 2009.

WHAT YOU NEED TO DO:

Plan administrators of group health care plans subject to COBRA need to act quickly to:

• Implement administrative procedures necessary to provide the subsidy.
• Provide notices required by the ARRA to COBRA qualified beneficiaries who are eligible for the subsidy.
• Implement the extended COBRA coverage periods.
• In addition, group health plan documents will need to be amended to incorporate these changes.
• Employers (or insurers, if applicable) will be required to file three types of reports relating to the subsidy.

1. Attest that each employee receiving the subsidy was involuntarily terminated.

2. File an accounting to report the payroll tax credit taken for the reporting period and the estimated credits to be taken during the following reporting period.

3. File a report of all covered employees, the amount of subsidy treated as a payroll tax credit for each employee and a designation as to whether the subsidy is for coverage of one individual or two or more individuals.