New COBRA rules on the horizon…

A client brought this to my attention, and I thought it would be appropriate to post on the blog.

With the recent passage of the American Recovery and Reinvestment Act of 2009, employees terminated (involuntarily) between September 1, 2008 and December 31, 2009 may be eligible for a reduced COBRA payment.  Here are some points about this change:

1.  The reduction in premiums for the terminated employee would only be allowed for nine months,

2.  Employers that must offer COBRA to terminated employees must still pay the full COBRA insurance payment to the insurance carrier, and then request the difference (e.g. the reduction to the employee) on their quarterly 941 payroll tax form,

3.  The 941 form is new for the first quarter of 2009 so make sure to use the new form even if you are not providing COBRA benefits to former terminated employees (and, no, there is not an extension of time to file the first quarter’s report – and if you are reading this and haven’t done it yet, then you are LATE!),

4.  The terminated employee must receive the COBRA reduced premium notification by April 18th, 2009 (send it Certified Return Receipt just to be sure),

5.  The terminated employee only has to pay 35% of the COBRA premium to the company sponsoring the insurance (that’s a 65% premium reduction to the employee), and

6.  If an employee quit, then they are not eligible for the COBRA insurance reduction, though you still must offer the COBRA insurance to them.

As mentioned above, if you are an employer that had terminated employees between the dates September 1, 2008 and December 31, 2009, then you must provide a Notice to those employees of this fact.  Here are some model notices on the Department of Labor’s website.  I believe an employer must offer COBRA when they have 20 full or part time employees.

Use the comments section to correct me on anything or add additional information for the benefit of all readers…

Thanks, Jason M. Blumer, CPA

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