New COBRA Regulations

Joy Duce, Director of Human Resources   email | bio
June 2009

The American Recovery & Reinvestment Act of 2009 (ARRA), signed by President Obama on February 17th, 2009, enacts new provisions for employers administering employee health benefits under federal COBRA legislation.

ARRA provides a 65 percent subsidy for COBRA continuation premiums of up to nine months for employees who have been involuntarily terminated as well as their eligible dependants. It also imposes new notice requirements on plans to alert qualified beneficiaries regarding the premium reduction. If an individual was offered Federal COBRA continuation coverage as a result of an involuntarily termination that occurred between September 1, 2008 and February 16, 2009, they have the opportunity to re-elect and pay a reduced premium. Even if an individual declined or elected COBRA and later discontinued it, they still have the opportunity for coverage and a reduced premium. However, if an individual is eligible for other group coverage (such as a new employer’s plan, a spouse’s plan or Medicare), they are not eligible for the premium reduction. The effective date is the first billing period on or after ARRA’s enactment date, which for most companies is March 1, 2009.

The subsidy requirement applies to group health plans that are subject to federal COBRA continuation coverage requirements or to similar requirements under state law. If you are an employer with such a plan and you receive 35 percent payment from an assistance-eligible individual, you are required to pay the remaining 65 percent. The employer may then recover the subsidy provided to assistance-eligible individuals by taking the subsidy amount as a credit on its quarterly employment tax return, IRS Form 941. For additional information on the Form 941 credit and the tax provisions in ARRA, visit www.irs.gov.

Guidance, model notices and forms have also been provided by the United States Department of Labor and can be accessed by searching “ARRA” at www.dol.gov.