COBRA Costs Have Less Bite
If your business has laid off workers since September 1, 2008, the good news for those who elected COBRA is that they may be eligible for reduced premiums. Under recent federal legislation, employers offering group health plans subject to COBRA must provide notice of a new COBRA premium subsidy and provide the subsidy where applicable. Read on to learn what action may be required on your part as a business owner to ensure compliance.
Premium Reductions
Earlier this year, President Obama signed into law the American Recovery and Reinvestment Act of 2009 (ARRA), which provides a new, temporary federal subsidy to help eligible individuals and their families pay COBRA premiums. Beginning with the first period of coverage on or after February 17, 2009, employees involuntarily terminated (except for gross misconduct) between September 1, 2008 and December 31, 2009 (and their qualifying family members) who elect COBRA or state continuation coverage are eligible to receive a 65 percent premium subsidy for up to nine months.
In addition, individuals involuntarily terminated between September 1, 2008 and February 17, 2009 (and their qualifying family members) who initially declined COBRA coverage, or who elected but subsequently dropped coverage, are eligible for a new 60-day election period to elect COBRA.
The premium reduction applies to all group health insurance plans subject to COBRA. Generally, this includes private employers with 20 or more employees, as well state and local government plans, but not those sponsored by certain church organizations. It also applies to group health insurance required by state law to provide comparable coverage (often referred to as “mini-COBRA” laws). ARRA does not require the special election opportunity for state continuation coverage, although a state can take action to do so.
The premium subsidy will last less than nine months if an individual becomes eligible for other group coverage or Medicare, or when the maximum period of COBRA (or state continuation) coverage ends.
Impact On Your Business
In most cases, the employer or plan administrator is required to advance the subsidy to eligible individuals. However, in the case of groups that are subject to state continuation laws, the insurer is responsible for advancing subsidy dollars. The subsidy to be paid is 65 percent of the premium charged to the plan participant, beginning with the first period of coverage on or after February 17, 2009.
Employers can receive reimbursement for the subsidy by claiming a credit on their IRS Form 941 quarterly employment tax return. Reports must be submitted to the U.S. Department of the Treasury, and include attestations of the involuntary termination of those receiving the subsidy and details of the payroll offset being claimed.
In addition to advancing the subsidy, when a group is subject to COBRA, the employer or plan administrator also is responsible for providing notice of the premium reduction to all individuals who have a qualifying event during the period from September 1, 2008 through December 31, 2009. Employers or plan administrators also are responsible for providing notice related to the 60-day special election period for eligible individuals who had a qualifying event between September 1, 2008 and February 16, 2009. This notice was to have been provided within 60 days after February 17, 2009. Insurers are responsible for notification regarding premium reduction for groups subject to state continuation.
Learn More
If your business is covered by COBRA and you have laid off employees since September 1, 2008, or plan to do so before the end of this year, ARRA impacts you. It’s imperative that you understand your obligations regarding the subsidy and notification to employees. The U.S. Department of Labor and Internal Revenue Service Web sites provide comprehensive information related to ARRA, including model notices and frequently asked questions, as well as other information related to the mandated subsidy.
Knowing what’s required of you as an employer is not only necessary from a compliance perspective, but also will enable you to provide eligible individuals valued assistance in paying their COBRA premiums.
Colleen Kallas is senior counsel at Assurant Employee Benefits, Kansas City, Mo., which specializes in quality employee benefits and services, including long-term and short-term disability, life and accidental death and dismemberment insurance, dental coverage and disability reinsurance management services. This e-mail address is being protected from spambots. You need JavaScript enabled to view it // (816) 556-7530
