March 19, 2009
Re: COBRA Continuation Requirement in the American Recovery and Reinvestment Act (ARRA)
As you know, in addition to the stimulus funding, the ARRA contained provisions to assist individuals and families directly affected by the economic crisis.
Among those were provisions for premium reductions and additional election opportunities for health benefits under the Consolidated Omnibus Budget Reconciliation Act of 1985, commonly called COBRA. Eligible individuals pay only 35 percent of their COBRA premiums and the remaining 65 percent is reimbursed to the coverage provider through a tax credit. The premium reduction applies to periods of health coverage beginning on or after February 17, 2009 and lasts for up to nine months for those eligible for COBRA during the period beginning September 1, 2008 and ending December 31, 2009 due to an involuntary termination of employment that occurred during that period. The TAA Health Coverage Improvement Act of 2009, enacted as part of ARRA, also made changes with regard to COBRA continuation coverage.
Individuals who request the premium reduction from their group health plan, but are denied may appeal to the U.S. Department of Labor. The Department is developing a process for reviewing denials and an official application form that must be used to file an appeal that will be available shortly.
A number of questions remain to be answered. We have yet to hear from the State Health Benefits Plan administrators. We suggest you contact your auditor to learn how these provisions apply to your former employees and to you, as the employer.
For more information on this, visit the U.S. Department of Labor’s website at http://www.dol.gov/ebsa/COBRA.html. Employers, including local governments, will be able to fully recoup their new COBRA costs, by taking them as a credit against their quarterly IRS withholdings. You can access the IRS information on this, and download the updated Form 941, at their website at http://www.irs.gov/newsroom/article/0,,id=204505,00.html. If your COBRA costs exceed your IRS withholdings, you will be entitled to a refund from the IRS.
For more information, contact Jon Moran at 609-695-3481, ext. 121.
Very truly yours,
William G. Dressel, Jr.