ARRA cuts COBRA premiums for laid-off workers
The American Recovery and Reinvestment Act of 2009, which became law in February, includes changes in the health benefit provisions of the Consolidated Omnibus Budget Reconciliation Act of 1985. In a nutshell, ARRA entitles employees who were "involuntarily" terminated after Sept. 1, 2008, and their dependents, to continue health care coverage through COBRA by paying only 35 percent of their premiums for up to nine months. The remaining 65 percent is paid by employers, who then credit the cost from federal payroll taxes when filing Form 941, Employer's Quarterly Federal Tax Return.
Employers should review the circumstances surrounding recent terminations and notify all former employees who were involuntarily terminated on or after Sept. 1, 2008 that they and their dependents may be eligible for the subsidy. If an organization employed 20 or more workers, such former employees may be eligible for the subsidy even if they didn't elect continued health coverage or elected it and then dropped it.
All employees, regardless of the number the organization employs, who were involuntarily terminated after Feb. 17, 2009, are eligible for the subsidy. Employers were required to notify any eligible individual that the subsidy is available and the requirements for qualification by April 17, 2009, and to provide necessary forms for electing COBRA during the special enrollment period, which began March 1.
Organizations should also be sure to change their handbook policies to reflect COBRA changes. If the organization uses a payroll service, it should be sure to verify that the services will administer the COBRA subsidy. The Department of Labor has released model notices to help employers comply with these requirements. Each notice is designed for a particular group of qualified beneficiaries and contains information to help satisfy ARRA's notice provisions. These links provide more information about COBRA and the ARRA:
