COBRA Legislation and the Economic Stimulus Package
President Obama signed The American Recovery Reinvestment Act of 2009 and important COBRA legislation is effective March 1, 2009. To comply with the COBRA subsidy provisions of the Act, employers will need to make significant changes immediately.
Following is a brief overview for educational purposes and does not constitute legal or accounting advice.
One of the provisions is a 65% government-paid subsidy for COBRA and NY State Continuation premiums for eligible individuals for no more than nine months. If an employee is involuntarily terminated during the period of September 1, 2008 through December 31, 2009, that individual (and dependents) may be eligible for the COBRA subsidy: those who currently have COBRA and those who don't have COBRA (even if they did have COBRA but are no longer covered, i.e., did not pay the required premium).
Those not entitled to the subsidy are individuals who voluntarily terminate employment or are high-income individuals.
When does it end? The subsidy ends if the individual becomes eligible for coverage under another group plan, spousal coverage, Medicare, or nine months after the first month that the individual receives the subsidy.
How does it work? The employer collects the 35% from the terminated employee then pays the full cost of the COBRA coverage. The employer recoups the 65% subsidy from the federal government by claiming a credit equal to the subsidy against "payroll taxes" (wage withholdings, employee FICA taxes and employer FICA taxes).
Pre-existing condition limitation would not apply for the period from termination to 3/1/09.
Goto http://www.dol.gov/ebsa/cobra.html for official information from the Department of Labor.
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