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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…)

Good news for HR pros who complain that the COBRA subsidy has placed an unfair burden on employers: the federal government, not employers, will be responsible for enforcing some of the subsidy provisions.

Under the ARRA or American Recovery and Reinvestment Act of 2009, employees involuntarily terminated between September 1, 2008 and December 31, 2009 qualify for a 65% subsidy on extended group health insurance.

However, the COBRA subsidy has income limits. Reduced subsidies apply to individuals with an adjusted gross income (AGI) of $125,000 or more and couples (filing jointly) with AGI  of  $250,000 or more. Individuals with adjusted gross incomes over $145,000 and couples with income over $290,000 for the year they receive COBRA (more…)

The COBRA subsidy is one of the most notable features of the ARRA or American Recovery and Reinvestment Act signed into law on February 17, 2009. 

The employee will pay just 35% of the usual COBRA premium. Under this plan, employees who lose healthcare coverage due to terminate will qualify for a 65% government subsidy on continued group insurance coverage under COBRA.

A new U.S. Department of Labor COBRA subsidy fact sheet outlines this program.

Under this program, the employer still pays the entire healthcare premium to the insurance company. The employer can then deduct 65% of the total premium from his or her payroll taxes.

Suppose a former employee of the XYZ Corp. normally pays $900 for COBRA coverage. Under the ARRA COBRA subsidy, the employee pays 35% of that amount, (more…)

The ARRA or American Recovery and Reinvestment Act of 2009 includes a special provision for continued healthcare coverage for unemployed workers under COBRA.

The COBRA subsidy means that many terminated workers will pay just 35% of their usual COBRA subsidy. The employer will pay the balance of the premium and take a tax credit on the quarterly payroll taxes. 

According to the latest U.S. Department of Labor COBRA Subsidy Fact Sheet, employers must conduct a special COBRA election period for qualified employees that lasts for 60 days. Notices about the special election period must be mailed to all eligible employees by April 17, 2009.

Individuals who were involuntarily terminated from September 1, 2008 through February 16, 2009 and did not elect to take COBRA coverage when it was offered, are eligible for the special election period. Workers who initially elected for the COBRA coverage but are no longer covered (perhaps because they have stopped paying the premiums) are (more…)