Month: March 2009

  • COBRA Notices Under the Recovery Act

    COBRA Continuation Coverage Assistance Under The American Recovery And Reinvestment Act Of 2009

    The American Recovery and Reinvestment Act of 2009 (ARRA) provides for premium reductions and additional election opportunities for health benefits under the Consolidated Omnibus Budget Reconciliation Act of 1985, commonly called COBRA. Eligible individuals pay only 35 percent of their COBRA premiums and the remaining 65 percent is reimbursed to the coverage provider through a tax credit. The premium reduction applies to periods of health coverage beginning on or after February 17, 2009 and lasts for up to nine months for those eligible for COBRA during the period beginning September 1, 2008 and ending December 31, 2009 due to an involuntary termination of employment that occurred during that period. The TAA Health Coverage Improvement Act of 2009, enacted as part of ARRA, also made changes with regard to COBRA continuation coverage.

    Individuals who request the premium reduction from their group health plan, but are denied may appeal to the Department. The Department is developing a process for reviewing denials and an official application form that must be used to file an appeal that will be available shortly.

    Notices

    ARRA mandates that plans notify certain current and former participants and beneficiaries about the premium reduction.

    The DOL has created model notices to help plans and individuals comply with these requirements. Each model notice is designed for a particular group of qualified beneficiaries and contains information to help satisfy ARRA’s notice provisions.

    General Notice (Full version) Plans subject to the Federal COBRA provisions must send the General Notice to all qualified beneficiaries, not just covered employees, who experienced a qualifying event at any time from September 1, 2008 through December 31, 2009, regardless of the type of qualifying event. This full version includes information on the premium reduction as well as information required in a COBRA election notice.

    General Notice (Abbreviated version) The abbreviated version of the General Notice includes the same information as the full version regarding the availability of the premium reduction and other rights under ARRA, but does not include the COBRA coverage election information. It may be sent in lieu of the full version to individuals who experienced a qualifying event during on or after September 1, 2008, have already elected COBRA coverage, and still have it.

    Alternative Notice Insurance issuers that provide group health insurance coverage must send the Alternative Notice to persons who became eligible for continuation coverage under a State law. Continuation coverage requirements vary among States, and issuers should modify this model notice as necessary to conform it to the applicable State law. Issuers may also find the model Alternative Notice or the abbreviated model General Notice appropriate for use in certain situations.

    Notice in Connection with Extended Election Periods Plans subject to the Federal COBRA provisions must send the Notice in Connection with Extended Election Periods to any assistance eligible individual (or any individual who would be an assistance eligible individual if a COBRA continuation election were in effect) who:

    1. Had a qualifying event at any time from September 1, 2008 through February 16, 2009; and
    2. Either did not elect COBRA continuation coverage, or who elected it but subsequently discontinued COBRA.

    This notice includes information on ARRA’s additional election opportunity, as well as premium reduction information. This notice must be provided by April 18, 2009.

    For more information, including Model notices, FAQs for Employers on the COBRA Premium Reduction, Expanded FAQs for Employees on the COBRA Premium Reduction, and Updated FAQs for Employees on General COBRA Provisions, see:

  • News from DOL on The American Recovery and Reinvestment Act

    Fact Sheets, Flyers, Posters & FAQs 

    Regarding the COBRA Premium Subsidy Under The American Recovery and Reinvestment Act of 2009

    The American Recovery and Reinvestment Act of 2009 expanded eligibility for COBRA and provides a premium reduction to certain qualified individuals.

    The American Recovery and Reinvestment Act of 2009 (ARRA) provides for a 65% reduction in COBRA premiums for certain “assistance eligible individuals” for up to 9 months. Although the DOL has begun issuing some flyers, posters and additional information on the COBRA provisions of the ARRA (see: www.dol.gov/ebsa/cobra.html), they have not—as of yet—issued an actual Model Notice, although we do expect that to be issued “any day now.”

    The Act provides for premium subsidies and additional election opportunities for health benefits under the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA). Eligible individuals pay only 35 percent of their COBRA premiums and the remaining 65 percent is reimbursed to the employer or coverage provider through a tax credit. The premium reduction applies to periods of health coverage beginning on or after February 17, 2009 and lasts for up to nine months.

    ARRA treats assistance eligible individuals who pay 35 percent of their COBRA premium as having paid the full amount. The premium reduction (65 percent of the full premium) is reimbursable to the employer as a credit against certain employment taxes. If the credit amount is greater than the taxes due, the Secretary of the Treasury will directly reimburse the employer for the excess.

    Do you have questions on how to administer the COBRA continuation premium subsidy to former employees? Check out these FAQs.

    Employers should use the updated Form 941, Employer’s Quarterly Federal Tax Return, to report their COBRA premium assistance payments. The Form 941 Instructions explain how to complete lines 12a and 12b, which address the COBRA premium assistance payments.

    Note: COBRA generally does not apply to plans sponsored by employers with less than 20 employees. However, the premium reduction is available in States, such as New York, that have similar requirements for small plans providing benefits through an insurance company.

    Under the Act, certain individuals who are eligible for COBRA continuation health coverage, or similar coverage under State law, may also receive the subsidy. These individuals are required to pay only 35 percent of the premium. The employer may recover the subsidy provided to assistance-eligible individuals by taking the subsidy amount as a credit on its quarterly employment tax return. The employer may provide the subsidy — and take the credit on its employment tax return — only after it has received the 35 percent premium payment from the individual.

    Links and Resources 

    If you have specific questions about your situation and how these new rules apply to you, you may wish to speak with a Benefits Advisors by calling 1.866.444.3272. You should also check the Employee Benefits Security Administration’s dedicated Web page at www.dol.gov/COBRA, for FAQs and new information related to the process you should follow to apply for COBRA and/or the premium reduction.

    We will continue to monitor developments, and will post new information to the site as it becomes available.

    Be sure to visit our new page on HRandBenefits.com, devoted to the American Recovery and Reinvestment Act of 2009 (The Economic Stimulus Bill) and, in particular, the COBRA provisions of the Act.