March 2009
New COBRA
Benefits in 2009 Stimulus Package
The
American Recovery and Reinvestment Act of 2009 calls for
changes to the health benefit provisions of the Consolidated
Omnibus Budget Reconciliation Act of 1985, commonly referred
to as COBRA. The new law affects former employees and their
families, employers and others involved in providing COBRA
coverage.
Under the
new law, eligible former employees enrolled in their
employer’s health plan at the time they lost their jobs, are
required to pay only 35 percent of the cost of COBRA
coverage. Employers must treat the 35 percent payment by
eligible former employees as full payment, but employers are
entitled to a credit for the other 65 percent of the COBRA
cost on their payroll tax return.
Employers
must maintain supporting documentation for the credit
claimed. This includes:
-
Documentation of receipt of the employee’s 35 percent
share of the premium.
-
In the
case of insured plans: A copy of invoice or other
supporting statement from the insurance carrier and
proof of timely payment of the full premium to the
insurance carrier.
-
Declaration of the former employee’s involuntary
termination.
COBRA
provides certain former employees, retirees, spouses, former
spouses and dependent children the right to temporary
continuation of health coverage at group rates. COBRA
generally covers health plans maintained by private-sector
employers with 20 or more full and part-time employees. It
also covers employee organizations or federal, state or
local governments. It does not apply to churches and
certain religious organizations. The new COBRA subsidy
provisions also apply to insurers required to offer
continuation coverage under state law similar to the federal
COBRA.
To
qualify, a worker must have been involuntarily separated
between September 1, 2008 and December 31, 2009. Workers
who had lost their jobs between September 1, 2008 and
February 17, 2009, but failed to initially elect COBRA
because it was unaffordable, will be given an additional 60
days to elect COBRA and receive the subsidy.
This
subsidy phases out for individuals whose modified adjusted
gross income exceeds $125,000, or $250,000 for those filing
joint returns. Taxpayers with modified adjusted gross income
exceeding $145,000, or $290,000 for those filing joint
returns, do not qualify for the subsidy.
If you
have questions, please contact Vincent Ruocco, LLC, CPA at
203.932.2931.
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