FYI: COBRA - Stimulus Law Changes
By Cindy Van Bogaert
February 26, 2009
Here is your latest FYI: Employee Benefits Update from Cindy Van Bogaert, Partner and Chair of the Employee Benefits Practice Group at Boardman Law Firm LLP.
This FYI provides information about some of the changes for employer health plans due to the American Recovery and Reinvestment Act of 2009 which was signed into law on February 17, 2009.
Here are the main changes for COBRA for employer plans due to this law:
- The new law provides a COBRA premium subsidy for certain individuals who have COBRA due to an involuntary termination of employment beginning September 1, 2008 through December 31, 2009. There is an income limit to qualify for the subsidy. The subsidy starts to phase out for individuals with modified gross income of $125,000 ($250,000 for joint returns) and is completely eliminated at $145,000 ($290,000 for joint returns). The qualifying individuals will pay 35% of the premium. The subsidy can last up to nine months. The government will subsidize the remainder, which may take the form of a payroll tax credit to the employer.
- The law allows certain individuals a second chance to elect COBRA coverage. These generally include individuals who were eligible for COBRA due to an involuntary termination of employment starting September 1, 2008. There are special rules to determine when coverage starts.
- The law allows employers to revise their plans to allow individuals already on COBRA a chance to elect different COBRA coverage options, but this is at the employer's election.
- There additional limitations and conditions on these new features in the law as well as a number of new notices and revisions to summary plan descriptions that will need to be sent to comply with this law.
- The law also changes the health coverage tax credit which affects COBRA administration.
What should employers do?
- There are special rules to determine which plans are covered. Check with your attorney to see which plans are affected.
- Address plan administration choices regarding allowing election of different options now.
- Consider coordination and design changes that might be needed for Cafeteria Plan mid-year changes in elections.
- Contact any insurer to make sure that your interpretation of the changes and additional coverage are consistent with your insurer's coverage.
- Set up procedures for reporting and crediting through payroll tax, if necessary.
- Identify individuals who were COBRA eligible during this period and those who were COBRA eligible due to involuntary termination of employment.
- Consult with your attorney if you subsidize premiums for COBRA recipients such as through a severance program.
- Consult with your attorney if you cover domestic partners under your health plans to determine how the new law applies to them.
- Contact your attorney regarding changes to your plan design, documents, notices, and forms. For many plans, these changes are expected to be effective March 1, 2009, but some could be effective February 17. There are different effective dates for different provisions.
Please contact me if you would like more information.
This FYI is not legal advice. Individuals should seek advice based on their particular circumstances from their own counsel. Nothing in this FYI is intended to be used, and no information can be used, for the purpose of avoiding penalties under the Internal Revenue Code, or promoting, marketing, or recommending to another party any transaction or matter addressed in this FYI.
If you have any questions or need assistance, please contact Cindy Van Bogaert at (608) 283-7543 or Email.
Would you like to have FYI: Employee Benefits Update sent directly to your e-mail inbox? If so, please send your request, with e-mail address, to Cindy Van Bogaert at Email.
