02.18.09
COBRA ALERT TO ALL EMPLOYERS
Eligible employees – An employee that was “involuntarily” terminated between Sep 1, 2008 and Dec 31, 2009, and their dependents, would be eligible for a subsidy of 65% of their COBRA premiums for up to nine months. Employees having an adjusted gross income of $125,000 ($250,000 for joint filers) in the year they would receive a subsidy are not eligible.
Funding process – The employer will be required to pay the 65% of premium initially, then recover that amount as a credit against their income tax and FICA withholding payments. If the premium due exceeds the tax obligations, the US Treasury will issue a refund check to the employer.
Employer notice requirements – new COBRA notices will need to be drafted to include information about the new subsidy terms. Also, any employees that were involuntarily terminated between Sep 1, 2008 and Feb 17, 2009 need to be notified that they will have an additional 60 days to elect COBRA and receive the subsidy. Coverage would start Feb 17, 2009 and not be retroactive. A notice also needs to go out to anyone that elected COBRA and lost coverage due to non-payment of premium.
The new regulation will create many new wrinkles in the COBRA regulations and generate many questions from employers and COBRA beneficiaries. This change is the most significant expansion of COBRA in it’s 23 year history. Model notices will be created and when they are ready, we will post those on our web resources for your use.
COBRA ALERT TO ALL EMPLOYERS
Employers of all sizes will be affected by the changes to COBRA that are included in the economic stimulus bill that was signed by President Obama on Feb 17, 2009. These changes will be effective immediately for monthly or other periods of COBRA after Feb 17, 2009. This includes employers in states that have continuation plans for small groups too.
Eligible employees – An employee that was “involuntarily” terminated between Sep 1, 2008 and Dec 31, 2009, and their dependents, would be eligible for a subsidy of 65% of their COBRA premiums for up to nine months. Employees having an adjusted gross income of $125,000 ($250,000 for joint filers) in the year they would receive a subsidy are not eligible.
Funding process – The employer will be required to pay the 65% of premium initially, then recover that amount as a credit against their income tax and FICA withholding payments. If the premium due exceeds the tax obligations, the US Treasury will issue a refund check to the employer.
Employer notice requirements – new COBRA notices will need to be drafted to include information about the new subsidy terms. Also, any employees that were involuntarily terminated between Sep 1, 2008 and Feb 17, 2009 need to be notified that they will have an additional 60 days to elect COBRA and receive the subsidy. Coverage would start Feb 17, 2009 and not be retroactive. A notice also needs to go out to anyone that elected COBRA and lost coverage due to non-payment of premium.
The new regulation will create many new wrinkles in the COBRA regulations and generate many questions from employers and COBRA beneficiaries. This change is the most significant expansion of COBRA in it’s 23 year history. Model notices will be created and when they are ready, we will post those on our web resources for your use.
