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Tools to improve the financial health of your employees.
COBRA and the American Recovery and Reinvestment Act The American Recovery and Reinvestment Act of 2009 (ARRA) helps people who experienced an involuntary terminatation of employment or reduction in hours that caused them to lose eligibility for medical insurance coverage. In essense, the federal government will pay 65% of the COBRA premium through a payroll tax credit. This significantly reduces the cost of coverage for the COBRA continuees, but also complicates the premium collection process. Assistance eligible individuals (AEIs) include employees (and their families) who lost coverage due to involuntary termination or a reduction in hours worked between September 1, 2008 and December 31, 2009. The term "involuntary" has not been defined, but it presumably includes those that lost coverage due to layoffs, plant closings, general reductions in the workforce, or cutbacks in the number of hours available to be worked. Employees involuntarily terminated for gross misconduct would likely not be eligible, but again, this situation is not explicitly addressed. AEIs that are currently on COBRA could receive refunds on premiums paid for coverage since September 1, 2008. AEIs that have not chosen to continue coverage under COBRA, and whose normal election deadline has passed, may be given another chance to participate. When the employer receives a subsidized COBRA premium (35% of the standard COBRA premium), the employer adds 65% of the premium from its assets and sends the premium to the insurance company, or in the case of a self-funded plan, combines it with the other funds set aside to pay medical expenses. The employer can then apply for a credit equal to 65% of the standard COBRA premium by either reducing payroll tax deposits during the quarter, or claim the subsidy at the end of the quarter as an overpayment of payroll taxes when filing IRS Form 941. In either case, the amount of the subsidy and the number of COBRA continuees receiving the subsidy must be reported on the 941. The subsidy for each AEI may last up to nine months. Links to the updated IRS Form 941, Instructions, and a Q&A are below:
BenefitsWorkshop is prepared to help you comply with the new COBRA Premium Assistance rules. Click the button below to contact a consultant with your COBRA questions.
Click the button below to order a COBRA administration proposal.
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