Earlier this year the Department of Labor made model notices available to assist employers in complying with the COBRA provisions in the American Recovery and Reinvestment Act of 2009 (ARRA). ARRA made temporary changes to the health benefit provisions of the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA), as well as continuation coverage under similar state laws.
Under ARRA, 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 are entitled to a credit for the other 65 percent of the COBRA cost on their payroll tax return.
Most employers should have already received the revised version of the "Employer's Quarterly Federal Tax Return", Form 941. This form is used to claim the new COBRA premium assistance payments credit, beginning with the first quarter of 2009.
Employers must maintain supporting documentation for the credit claimed. This includes:
- Documentation of receipt of the employee's 35 percent share of the premium.
- For insured employers, 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.
- For self-insured employers, proof of the premium amount and proof of the coverage provided to the assistance eligible individuals;
- Proof of each assistance eligible individual's election of COBRA coverage and continued eligibility for COBRA coverage at any time during the period from September 1, 2008 to December 31, 2009;
- Declaration of the former employee's involuntary termination.
The premium reduction applies to those employees involuntarily terminated, for reasons other than gross misconduct, between September 1, 2008 and December 31, 2009. The benefit is limited to nine months per employee.
Each case an employer may face is unique and may require legal advice. If these recent changes apply to your company, or you have other employment questions, please contact either Valerie Walker or John Egbert for more detailed information.