labor lawAdivision of labor law center

Many employers have questions about the COBRA subsidies offered under the Obama administration’s stimulus plan, which was signed into law on February 17, 2009.

 

The  ARRA, or American Recovery and Reinvestment Act of 2009, included a provision to subsidize extended health insurance coverage under COBRA, for some eligible employees.

 

The plan applies only to an “assistance eligible individual” or AEI who is laid off through no fault of his or her own, or is a dependent of a laid-off employee.

 

The subsidy applies beginning March 1, 2009 for employers who use calendar months for healthcare coverage.

 

Under the plan, the employee pays just 35% of his or her COBRA health care premium. The employer pays the other 65% of the COBRA premium. Employers can then take a tax credit on the payroll taxes paid to the federal government, to recoup the COBRA payments.

 

Under the ARRA, the COBRA subsidy does not apply to flexible spending accounts or FSAs. It is available for a maximum of 9 months for each AEI, or until the employees COBRA eligibility ends.

 

The subsidy ends when an AEI becomes eligible for coverage under another group health care plan or Medicare. If the AEI finds another job and is eligible for health care coverage, the COBRA subsidy ends, even if the AEI elects not to sign up for health care coverage with the new employer. 

 

Under this plan, 35% of the COBRA premium must be paid by the employee. Employers are not permitted to pay that portion, even if they wish to.

 

Every AEI qualifies for the subsidy. However, high-income individuals and their spouses will be required to repay the subsidy on their individual tax returns. For ARRA purposes, a high-income individual is a single taxpayer with a modified adjusted gross income in excess of $145,000 or a married taxpayer filing jointly with a modified adjusted gross income in excess of $290,000. Single taxpayers with adjusted income of $125,000 (or married ones with adjusted income of $250,000) will be required to partially repay the subsidy.

 

The COBRA plan administrator must allow an AEI who qualifies a high-income individual to waive the subsidy voluntarily. If the AEI does so, then he or she must pay 100%  of the COBRA premium.

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1. Posted by: Jose Lopez

   I will like to have more information about these matters

2. Posted by: Derrick

   Hi Jose! Check back regularly. We will be posting more news on the COBRA subsidy program as it becomes available. Meanwhile, if you have a specific question, ask away! And thanks for reading the blogs!~ Derrick

3. Posted by: Nancy

   Where do we learn about this cobra stimulus plan? I may be too late by the time it is available….If anyone knows please email me. Thanks Nancy

4. Posted by: Amelia

   Hi Nancy! Employers are required to inform workers of their eligibility for the COBRA Premium Reduction by April 17. Since you have not received any information, contact both your former employer and your insurance company. Or contact the U. S. Department of Labor at: http://www.dol.gov/ebsa/faqs/faq_consumer_cobra.HTML HTH, and thanks for reading the blogs!~ Amelia

5. Posted by: renee korb

   Message
   How does the law define gross negligence? If an employer can prove fault and prevent the employee from receiving unemployment benefits would that qualify as the employee’s fault?

6. Posted by: Amelia

   Hi Renee! Usually the concept of gross negligence does not apply in the workplace, except to workplace injuries or accidents. We think you are looking for “gross misconduct” which is willful misconduct by an employee. In other words, the employee knew the rules and choose to break them anyway. Yes, in some cases an employee can be denied unemployment benefits when fired due to gross misconduct. HTH, and thanks for reading the blogs!~ Amelia