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Dear Workforce How Does the Stimulus Bill Change COBRA Provisions

What do employers need to do to tell employees about the new COBRA provision of the stimulus law? What are the administrative issues that employers will face?
March 4, 2009
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Related Topics: Medical Benefits Law, Benefit Design and Communication, Workforce Planning, Dear Workforce, Benefits
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Dear Struggling to Grasp:

The American Recovery and Reinvestment Act of 2009, enacted by Congress on February 17, 2009, provides a temporary subsidy that covers 65 percent of the COBRA premium charged to former employees for up to nine months if the employee was involuntarily terminated and the event occurred on or after September 1, 2008, and before December 31, 2009.
Employer-funded health plans must explain the availability of the premium subsidy when they give COBRA election materials to qualified beneficiaries who lose coverage before 2010, and to those who had a qualifying event on or after September 1, 2008, whether or not they had elected COBRA at that time.
Notice must be provided to these individuals by April 18, 2009. The Labor Department is directed to provide model notices no later than March 17, 2009.

Plan sponsors should start planning for compliance with the COBRA premium assistance program because implementation is required almost immediately. Unlike earlier targeted subsidy programs, the group health plan, rather than the individual, will have the burden of determining who is eligible and, therefore, who can maintain COBRA coverage by paying only a portion (35 percent) of the regular COBRA premium.
Plan sponsors should:
  • Determine how to identify individuals whose qualifying event was triggered by involuntary termination. Although loss-of-plan eligibility due to a reduction in hours or voluntarily quitting a job are also qualifying events that entitle people to COBRA, the subsidy does not appear to be available in those circumstances.
  • Identify qualified beneficiaries whose health plan coverage terminated after August 31, 2008, including those who did not elect COBRA. The employer will need to notify them about the new election and subsidy options.
  • Modify existing COBRA election notices to include information regarding the premium assistance subsidy and, if applicable, new coverage elections (employers may allow these individuals to select a cheaper coverage within 90 days of the notice).
  • Prepare to report supporting information to the government to document the premium assistance amount they are requesting and confirm that the qualified beneficiaries for whom the premium assistance is sought meet the eligibility standards.
  • Review their processes for determining and paying payroll taxes to be able to modify them as needed to receive the subsidy payments, and review the revised Form 941 and instructions that provide information on the COBRA subsidy.
Effective for the first period of coverage after February 17 (generally March 2009), the subsidy is available to any COBRA qualified beneficiary who elects COBRA coverage and whose qualifying event is related to involuntary termination of employment that occurs between September 1, 2008, and December 31, 2009.

The subsidy is phased out for couples with income above $250,000 and is not available if income tops $290,000 ($125,000-$145,000 for singles).

SOURCE: Kathryn Bakich, senior vice president and national director of health care compliance, the Segal Co., Washington, D.C., March 2, 2009

LEARN MORE: Crafted and pitched as a short-term boost to lift the U.S. out of a deep recession, the $787 billion stimulus package could have long-term consequences for employers.

The information contained in this article is intended to provide useful information on the topic covered, but should not be construed as legal advice or a legal opinion. Also remember that state laws may differ from the federal law.
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 The information contained in this article is intended to provide useful information on the topic covered, but should not be construed as legal advice or a legal opinion. Also remember that state laws may differ from the federal law.

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