HOT TOPICS
1/1/09 STIMULUS PACKAGE UNDER PRESIDENT OBAMA
Stimulus Package Affects COBRA Requirements The American Recovery and Reinvestment Act (ARRA) of 2009 (generally known as the economic stimulus package) signed into law by President Barack Obama on February 17, 2009 significantly impacts employer obligations under the Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA") and similar state laws.
While some of the rules are yet to be worked out and published, there are some basic requirements to follow. More.
- The American Recovery and Reinvestment Act (ARRA) of 2009 (generally known as the economic stimulus package) requires new COBRA notices to be provided to COBRA-eligible beneficiaries who were involuntarily terminated from their employment between September 1, 2008 & December 31, 2009, and reduces the amount employers can charge qualified beneficiaries who elect COBRA continuation coverage. The new provisions also apply to the dependents of those employees;
- Employers usually may charge qualified beneficiaries who have elected such coverage 102 percent of the total cost of the premium for coverage. For qualified beneficiaries covered by the ARRA, however, an employer must pay 65 percent of the premium cost and may charge the covered beneficiary only the remaining 35 percent. The employer may take a refundable credit toward its payroll taxes for its 65 percent share of the premiums, as long as the qualified beneficiary’s premium payment actually has been received by the employer or other payee.
- The 65-percent employer contribution requirement applies for the first nine months of the COBRA period, at which time the employer may increase the employee share of the premium cost up to 102 percent. The 65-percent contribution requirement also terminates if a qualified beneficiary becomes eligible for coverage under another group health plan or Medicare.
- The ARRA requires that employers offer an additional COBRA election period to any person enrolled as of February 17, 2009 and otherwise covered by the ARRA. In addition, the additional election period must be offered to persons who previously declined COBRA coverage and persons who elected and later terminated COBRA coverage. (The ARRA does not change the length of available coverage under COBRA.) Employers must send out the additional election-period notices on or before April 18, 2009.
- Notices are now required to include a description of the
new employer premium requirement, its duration, and the option to enroll
in different coverage if the employer normally permits COBRA qualified beneficiaries
to enroll in different coverage. Although the ARRA requires that the U.S.
Department of Labor (DOL) issue model notices within 30 days of the effective
date of the ARRA, it is unclear when the DOL will do so. The additional
election period expires 60 days after the employer provides an appropriate
notice. Notices to individuals experiencing a qualifying event after
February 17, 2009 are still governed by the normal response period. Significant
penalties and fines are built into the law for employer compliance,
so now is the time to work with your COBRA Administrator, Payroll
Company and/or Tax Accountant to comply with the ARRA requirements.
If you act as your own COBRA administrator and you have involuntarily terminated
any employees under the above circumstances, you are encouraged to contact
your HR Ideas Manager.
