COBRA SUBSIDIES UNDER THE FEDERAL STIMULUS PACKAGE
Of the numerous issues covered under the recently enacted federal stimulus package, employers and employees alike should take note of the provisions offering subsidies for COBRA benefits for eligible workers.
COBRA is an acronym for the Consolidated Omnibus Budget Reconciliation Act. It is a piece of federal legislation from the 1980s. Under COBRA, most terminated workers have been able to continue participation in employer provided health care plans for up to 18 months. However, the employee pays the entire cost of continued coverage.
Under the American Recovery and Reinvestment Act of 2009 passed last week, eligible workers can receive a 65% subsidy toward their COBRA premium for up to 9 months. The employers or plans who normally administer COBRA benefits can receive a credit against payroll taxes to offset the cost of the subsidy.
Who is eligible? Workers who lost their jobs involuntarily between September 1, 2008 and December 31, 2009. They must have annual incomes less than $125,000 for individuals or less than $250,000 for couples.
What must employers do? From now on, COBRA notices must specifically reference the subsidy, which is effective for premiums starting March 1. Also, a special sixty day election period – starting February 17 — must be offered to otherwise eligible individuals who previously declined COBRA coverage. Model notices are supposed to be available from the Department of Labor in thirty days.
Experts caution that all of the rules and implications surrounding this provision still are not clear. Employers need to be attentive and cautious. Employees should seek guidance before making election decisions.
Dirk A. Beamer
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