New COBRA Provisions

If you do not have 20 or more employees (full and part-time) this does not apply to your office.

The American Economic Recovery and Reinvestment Act  

President Barack Obama signed the American Economic Recovery and Reinvestment Act (ARRA) on February 17, 2009.   The law gives “Assistance Eligible Individuals” the right to pay reduced COBRA premiums for periods of coverage beginning on or after February 17, 2009 and can last up to 9 months.   The Federal government will pay up to 65% of the medical premiums under COBRA for qualified individuals.   The subsidy was effective March 1, 2009.  

ARRA provides a premium subsidy for healthcare continuation coverage under the existing provisions of COBRA and mandates an extension of the election period for individuals who were involuntarily terminated from their employment on or after September 1, 2008 but prior to February 17, 2009.   Group health plans need to comply on or before April 18, 2009 with the Notice requirements in ARRA.   There are income limits, and if an employee becomes eligible for Medicare or another group health plan, the premium subsidy isn’t available even if COBRA coverage is chosen.

Who is eligible for premium assistance?

1. Any COBRA qualified beneficiary that became eligible for COBRA continuation coverage during the period beginning September 1, 2008 and ending December 31, 2009
2. Individuals who elected COBRA  
3. Individuals whose qualifying event was an involuntary termination

Who is eligible for an extended COBRA election period?

Individuals who, as of February 17, 2009, have not elected COBRA, or who elected COBRA but let it lapse prior to February 17, 2009 are eligible. Eligible individuals must be sent a COBRA election notice; the special election period ends 60 days after the notice is provided and is not retroactive to earlier COBRA eligibility dates.

How does the employer obtain reimbursement for the 65% subsidy?     

The employer will receive reimbursement of up to 65% of the premium in the form of an offset in the amount of payroll tax due by the amount of the subsidy reimbursement.   The employer must file a claim for reimbursement with the IRS through the Quarterly Federal Tax Return, Form 941.