By Edwin S. Hopson
On December 19, 2009, President Obama signed into law a measure that provides for an expansion of the COBRA subsidy for unemployed persons and a 2 month extension of the eligibility period. The COBRA subsidy, which was set to expire December 31, 2009, requires employers to pay 65% of the cost of COBRA for eligible unemployed workers, but also allows employers to take an offset of that cost against payroll taxes due the federal government. The measure also included an additional 13 to 20 weeks of unemployment benefits and a raise in the benefit payment of $25 per week. This legislation was inserted in the massive Defense spending bill – H.R. 3326 – which was approved by a vote of 395 to 35 on December 16, 2009 in the House. Tthe Senate passed the bill on December 19, 2009. Here are the details according to the U.S. Department of Labor’s “fact sheet.”
The American Recovery and Reinvestment Act of 2009 (ARRA), as amended on December 19, 2009 by the Department of Defense Appropriations Act, 2010 (2010 DOD Act) provides for premium reductions for health benefits under the Consolidated Omnibus Budget Reconciliation Act of 1985, commonly called COBRA. Eligible individuals pay 35% of their COBRA premiums and the remaining 65% is reimbursed to the employer through a payroll tax credit. To qualify, individuals must experience a COBRA qualifying event that is the involuntary termination of a covered employee’s employment. The involuntary termination must occur during the period that began September 1, 2008 and ends on February 28, 2010. The premium reduction applies to periods of health coverage that began on or after February 17, 2009 and lasts for up to 15 months.
In addition, individuals who had reached the end of the reduced premium period before the legislation extended it to 15 months will have an extension of their grace period to pay the reduced premium. To continue their coverage they must pay the 35% of premium costs by February 17, 2010, or, if later, 30 days after notice of the extension is provided by the plan administrator.
Individuals who lost their subsidy and paid the full 100% of the premium in December 2009, should contact the plan administrator or employer sponsoring the plan to discuss a credit for future months of coverage or a reimbursement of the overpayment.
To be eligible, the employee or a member of his/her family must be someone who (a) has a qualifying event for continuation coverage under COBRA or a State law that provides comparable continuation coverage (for example, so-called “mini-COBRA” laws) that is the employee’s involuntary termination at any point from September 1, 2008 through February 28, 2010; and (b) elects COBRA coverage timely.
Those who are eligible for other group health coverage (such as a spouse’s plan) or Medicare are not eligible for the premium reduction. There is no premium reduction for premiums paid for periods of coverage that began prior to February 17, 2009.
ARRA, as amended, mandates the provision of certain notices. As part of the COBRA election notice, plan administrators must provide information about the premium reduction to all individuals who have COBRA qualifying events from September 1, 2008 through February 28, 2010.
Plan administrators must also provide notice about the changes made to the premium reduction provisions of ARRA by the 2010 DOD Act to individuals who have already been provided a COBRA election notice (unless the election notice included the updated premium reduction information). Moreover, according to the Department of Labor, (a)individuals who are “assistance eligible individuals” must be provided this notice by February 17, 2010; (b) individuals who experience a termination of employment on or after October 31, 2009 and lose health coverage must be provided this notice within the normal timeframes for providing continuation coverage notices; and (c) individuals who are in a “transition period” (a period that begins immediately after the end of the nine months of premium reduction in effect under ARRA before the amendments made by the 2010 DOD Act, as long as those nine months ended before December 19, 2009 and the premium reduction provisions of the 2010 DOD Act would apply due to the extension from nine to 15 months) must be provided this notice within 60 days of the first day of the transition period.
If an individual’s modified adjusted gross income for the tax year in which the premium assistance is received exceeds $145,000 (or $290,000 for joint filers), then the amount of the premium reduction during the tax year must be repaid. For taxpayers with adjusted gross income between $125,000 and $145,000 (or $250,000 and $290,000 for joint filers), the amount of the premium reduction that must be repaid is reduced proportionately. Individuals may permanently waive the right to premium reduction but may not later obtain the premium reduction if their adjusted gross incomes end up below the limits.
For more details, see http://www.dol.gov/ebsa/newsroom/fscobrapremiumreduction.html