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February 13, 2009
House OKs Economic Stimulus Package with Scaled Back COBRA Subsidy
The House voted 246 to 183 Friday in favor of an economic stimulus package that includes a scaled-back COBRA subsidy for laid-off workers and other HR-related provisions. No Republican voted in favor of it. The Senate is poised to vote on the legislation as well.

The two chambers of Congress initially approved different versions of the economic stimulus package. Therefore, negotiators from both chambers have been ironing out a final version of the legislation for a vote. The House-Senate negotiations resulted in an agreement on the final version of the legislation called a conference report.

The legislation that the House approved today includes a COBRA subsidy for laid-off workers. The subsidy would be 65 percent of the COBRA premium for a period of 9 months--employers (or health plans if they administer COBRA benefits) would receive a credit against payroll taxes to offset the subsidy. The 9 months of subsidies is a shorter period of time than the House and Senate had approved initially, when they voted in favor of a 12-month subsidy.

The premium subsidy would cover workers who were affected by involuntary terminations occurring between September 1, 2008, and January 1, 2010.

The conference agreement added an income threshold as an additional condition on an individual's entitlement to the premium subsidy during any taxable year.

Under the income threshold, if the premium subsidy is provided with respect to any COBRA continuation coverage which covers the taxpayer, the taxpayer's spouse, or any dependent of the taxpayer during a taxable year and the taxpayer's modified adjusted gross income exceeds $145,000 (or $290,000 for joint filers), then the amount of the premium subsidy for all months during the taxable year must be repaid.

For taxpayers with adjusted gross income between $125,000 and $145,000 (or $250,000 and $290,000 for joint filers), the amount of the premium subsidy for the taxable year that must be repaid is reduced proportionately.

The House-Senate negotiators decided to drop a provision from the initial House version of the package that would have given COBRA-eligible workers who are 55 and older, or have worked for an employer for 10 or more years, the ability to retain COBRA coverage, at their own expense, until they become Medicare eligible at age 65 or secure coverage through a subsequent employer. Therefore, this provision isn’t in the final version of the legislation.

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