The Department of Labor and the Internal Revenue Service have published resources to help organizations comply with a newly created subsidy for COBRA premiums.
The recently enacted American Recovery and Reinvestment Act of 2009 (ARRA) provides for a 65 percent subsidy for COBRA continuation premiums for up to 9 months for workers who have been involuntarily terminated.
The Internal Revenue Service's resources on the COBRA subsidy include a list of questions and answers for employers. The IRS has also updated Form 941, Employer's Quarterly Federal Tax Return, which employers should use to report their COBRA premium assistance payments. The Form 941 Instructions explain how to complete lines 12a and 12b, which address the COBRA premium assistance payments.
The Department of Labor's created a fact sheet to help organizations comply with the new COBRA subsidy, which can be found on HR.BLR.com at http://hr.blr.com/timesavers.aspx?id=79628.
Under the ARRA, an assistance-eligible individual (AEI) is considered to have fully paid the premium for COBRA continuation coverage if the individual pays 35 percent of the premium. The subsidy program is effective for the first coverage period beginning on or after February 17, 2009. In most cases (plans with calendar month coverage periods), this will be March 1, 2009.
The legislation requires that information on the COBRA subsidy be included in COBRA notices. Under the legislation, the Department of Labor must create a model notice within 30 days of February 17, 2009.
The subsidy terminates when the covered individual is offered any new employer-sponsored healthcare coverage or becomes eligible for Medicare. Workers who were involuntarily terminated on or after September 1, 2008, and before February 17, 2009, but failed to initially elect federal COBRA continuation coverage, have an additional 60 days to elect federal COBRA and receive the subsidy.