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As predicted, the federal government extended the COBRA subsidy on March 2, 2010. The Temporary Extension Act of 2010 results in a continued COBRA premium subsidy to American workers who are unemployed through no fault of their own. In addition, the act extends the subsidy from 9 months to 15 months for many affected workers.

The COBRA subsidy extension applies to employees who are involuntarily terminated between September 1, 2008 and March 31, 2010.

Under a new provision of the COBRA subsidy, workers who are terminated involuntarily on or after March 2, 2010 are eligible if that termination follows a qualifying event that was a reduction of hours. The qualifying event must have occurred between September 2, 1008 and March 31, 2010. For example, if an employee’s hours were reduced in November 2009 and he is subsequently laid off after March 2, 2010, he will qualify for the COBRA premium reduction.

The current premium reduction lasts for 15 months and applies to employees who were laid off on or after February 17, 2009. Some of these employees have already had the COBRA subsidy for 9 months. (more…)

In late-breaking news, on December 16, 2009  Congress passed a law to extend both the COBRA subsidy implemented under the stimulus package in February 2009, and unemployment benefits to millions of Americans. 

Still, many workers who were eligible for the subsidy at its inception have already lost coverage – they exhausted available benefits on December 1, 2009. Regardless of the date of termination, the COBRA premium reduction is available for a maximum of 9 months.

Employees terminated on or before December 31, 2009 will qualify for the original COBRA subsidy. The subsidy allows workers to continue their current health insurance coverage while paying just 35% of the COBRA premium. The balance of the COBRA premium is paid by the employer, who takes a credit on the quarterly payroll taxes, passing the cost along to the federal government.

Actually, until President Obama signs the extension into law, an employee terminated in late December 2009 might not qualify for the COBRA subsidy, if his or her group insurance coverage continues until January 1, 2010.

Any employer who is considering laying employees off in early January might actually be doing the workers a favor by terminating them prior to December 31, 2009 unless the extension goes into effect ASAP.

In order to qualify for the COBRA subsidy, the worker must lose his or her job through no fault of their own. Employees who voluntarily resign, or who are fired for misconduct, do not (more…)

The IRS recently issued new regulations regarding the COBRA Subsidy under the ARRA.

As most employers know by now, the most recent stimulus package included a provision to provide continued healthcare at just 35% of the usual premium, to employees who are laid off between September 1, 2008 and December 31, 2009. The COBRA subsidy continues for 9 months.

The most recent IRS regulations provide guidelines on several key subjects, including the definition of involuntary termination, the calculation of premium reduction and other issues.

Under the ARRA, an employee is entitled to a COBRA subsidy if they meet the income guidelines and are involuntarily terminated between September 1, 2008 and December 31, 2009. According to the IRS regulations, an employee who terminates employment due to the employers material adverse actions, qualifies for the COBRA Premium Reduction. For example, an employee who accepts a severance package rather than be laid off, would qualify for the COBRA subsidy.

In another example, an employee who quit rather than accept a significant reduction in wages or hours, would qualify for the COBRA premium reduction.

Layoffs, whether temporary or permanent, where the employees hours are effectively (more…)

The 2009 COBRA Premium Reduction under the ARRA affects millions of laid-off workers, and employers are being deluged with questions on it. Here are some answers to the most frequent questions.

COBRA, the Consolidated Omnibus Budget Reconciliation Act, permits employees to extend their group health insurance after being laid off or terminated. The COBRA Subsidy reduces premiums for workers who are out of work, though no fault of their own. COBRA regulations are issued through the U.S. Department of Labor.

How much is the COBRA premium reduction?

The COBRA premium reduction is 65%, meaning that the federal government picks up 65% of the tab, while the employee pays just 35% of the usual COBRA premium.

When should employees be notified of the COBRA Premium Reduction? Employees laid off between September 1, 2008 and February 17, 2009 must be informed in writing of the premium reduction by April 17, 2009.  Employees then have 60 days after receiving notice to opt to sign up for COBRA under the reduced premium.

Employees who are terminated between February 17, 2009 and December 31, 2009 must be notified of COBRA within 60 days, just as usual. However, that notification will include the reduced premium.

Any laid-off worker who has not received notification at this point, should contact both the previous employer and the insurance administrator.

Can employees who initially declined COBRA sign up now, with the reduced premium?

Yes, an employee who was terminated between September 1, 2008 and February 17, 2009 can sign up for COBRA with reduced premiums during the special election period. This is true, even if the employee initially declined COBRA coverage when terminated.

How long does the COBRA Premium Reduction last? (more…)

As daily readers of this blog know, the ARRA or American Recovery and Reinvestment Act of 2009 provides for extended COBRA coverage at reduced cost for many unemployed workers.

COBRA, or the Consolidated Omnibus Budget Reconciliation Act of 1985, permits employees to extend their group health insurance coverage for up to 18 months when they lose coverage due to unemployment, a reduction in hours, divorce, or similar circumstances. COBRA also applies to dependents who lose group health insurance coverage for similar reasons, or due to the employee’s death. Employees who are fired for gross misconduct are not eligible for COBRA coverage.

The big news is that ARRA allows employees to pay just 35% of their usual COBRA premium. It also gives eligible employees a special period to sign up for COBRA coverage. This COBRA premium reduction covers any worker who has lost their job between September 1, 2008 and December 31, 2009.

Under the COBRA Premium Reduction, the employee can pay just 35% of the usual COBRA premium. The employer pays the remaining 65% of the premium, and then takes a tax credit on the quarterly federal payroll taxes. In this way, the federal government is picking up the tab on 65% of the employees group health insurance premium, and there is no gap in healthcare coverage.  

The COBRA Premium Reduction under the 2009 stimulus package applies for a maximum of 9 months.

Employees who did not opt to take advantage of COBRA coverage have a second chance (more…)