DOL issues model COBRA notices for employers

Late last week the Department of Labor (DOL) issued four model notices that employers can use to explain federal premium subsidies available under COBRA.

As part of the economic stimulus plan President Obama signed into law in February, employees who were involuntarily terminated between September 1, 2008, and December 31, 2009, are eligible to retain their group health coverage for a period of up to nine months by paying a portion of the COBRA premium.

Involuntarily terminated employees must pay 35 percent of the COBRA premium and employers must front the money for the remaining 65 percent. Employers will pay the insurer directly, then claim it as an offset against payroll tax liabilities. Payroll will then report any subsidies and take the offset on an updated Form 941.

"Our action today gives workers and their families useful information on their right to receive the COBRA subsidy and makes it easier for employers and plans to meet their notice obligations. Given the current economic situation facing dislocated workers and their families, it is very important that individuals do not lose their group health coverage," said Alan D. Lebowitz, deputy assistant secretary of labor for the department's Employee Benefits Security Administration (EBSA).

Employers can send the DOL’s model notices to COBRA beneficiaries advising them of the subsidy and how they can enroll for coverage.

Designed to fit different situations, the four COBRA model notices include:

• A general or “full” notice to be given to beneficiaries who lost group coverage between September 1, 2008, and December 31, 2009.
• An abbreviated general notice that would be for beneficiaries who are currently receiving unsubsidized COBRA.
• An alternative notice explains the right of individuals working in states with continuation coverage laws, or “mini-COBRA” laws, which apply to employers with fewer than 20 employees.
• A notice of extended election periods for eligible individuals who lost their jobs before the stimulus plan was signed into law, between September 1, 2008 and February 16, 2009, and declined or discontinued COBRA coverage at the time.

Each package includes information of the premium reduction provisions, a series of questions and answers, and which forms to use in requesting the premium reduction or COBRA coverage.

More information on the COBRA subsidy:

• Stimulus plan subsidizes COBRA, expands unemployment insurance
• IRS releases info to help employers claim COBRA credit

DOL issues model COBRA notices for employers

IRS releases info to help employers claim COBRA credit

The Internal Revenue Service (IRS) has released detailed information that will help employers claim credit for the COBRA medical premiums they pay for their former employees, a measure contained in President Obama’s economic stimulus package passed last month.

Employers will find a comprehensive set of questions and answers at IRS.gov, in addition to a revised version of the quarterly payroll tax return employers must use to claim credit for COBRA medical premiums paid for former employees.

Beginning with the first quarter of 2009, the Employer’s Quarterly Federal Tax Return, Form 941, is the form used to claim the new COBRA payments credit.

“This is the first step in our effort to provide employers with information on this important health benefit for people who have lost their jobs,” said IRS Commissioner Doug Shulman. “We will continue our work in the weeks ahead to help employers implement this crucial change for the nation’s unemployed.”

In February, President Obama signed the American Recovery and Reinvestment Act of 2009. The new law contains specific changes to COBRA health benefit requirements, changes that affect former employees, their employers and COBRA coverage providers.

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 the employers are entitled to a credit for the other 65 percent of the COBRA cost on their payroll tax return.

The IRS notes that employers must maintain supporting documentation for the COBRA credit claimed, including:

• 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.

Visit the Department of Labor for more information about COBRA payments and read another HR Forum post on the subject: Stimulus plan subsidizes COBRA, expands unemployment insurance.

IRS releases info to help employers claim COBRA credit

Stimulus plan subsidizes COBRA, expands unemployment insurance

President Barack Obama signed the $787 billion stimulus package into law yesterday hoping to provide a boost to the nation's continuing recession.

"I don't want to pretend that today marks the end of our economic problems, nor does it constitute all of what we're going to have to do to turn our economy around," said Obama, who signed the bill at the Denver Museum of Nature & Science, underscoring its hope of creating environmentally-friendly jobs.

"But today does mark the beginning of the end; the beginning of what we need to do to create jobs for Americans scrambling in the wake of layoffs; the beginning of what we need to do to provide relief for families worried that they won't be able to pay next month's bills; the beginnings of the first steps to set our economy on a firmer foundation, paving the way to long-term growth and prosperity." Read the full Boston Globe story.

The stimulus plan contains specific measures that will effect most businesses across the country, including a COBRA subsidy for laid-off workers, hiring incentives and new HR requirements.

Roughly $21 billion of the stimulus package is available to help workers who have been laid off to keep their employer-provided health insurance through COBRA, the federal law that gives unemployed workers the right to maintain their employer health insurance after a layoff.

The federal government will pay 65 percent of COBRA premiums for a period of nine months for employees who are laid off from September 1, 2008 through December 31, 2009. Employers will receive a payroll tax credit to offset the subsidy. Employers must notify former employees who are eligible for the new subsidy by March 1.

Documents will have to be updated as the new rule requires that information on the COBRA subsidy is to be included in employers' COBRA notices.

The stimulus also outlines tax benefits for hiring certain types of workers. If your company hires an unemployed military veteran or a person who didn’t finish high school, you could receive a $2,400 per employee tax credit as part of the Work Opportunity Tax Credit. The two new classes of qualified workers were added to the “target group” of disadvantaged workers.

Other HR requirements included in the stimulus plan:

• An increase of weekly unemployment benefits by $25.
• An extension of the temporary emergency unemployment compensation program through December 2009. The program provides up to 33 weeks of extended unemployment benefits.
• Unemployment compensation to workers who leave an employer for "compelling family reasons," such as domestic violence, illness or disability of an immediate family member.

As the Department of Labor releases more information on the compete details of the stimulus plan and what will be required of businesses, G.Neil's legal team will be there to help make sure your organization is fully compliant.

Please check back often or subscribe to our blog for the latest updates on how the stimulus plan impacts your business.

For more on how the stimulus package will impact your business, read:

USA Today - Employers fear cost of health insurance for jobless workers

HR Morning - Obama stimulus package contains 6 big paperwork changes for you

Boston Globe - Stimulus is signed as storm builds

About.com: Human Resources - Economic stimulus package and COBRA

Stimulus plan subsidizes COBRA, expands unemployment insurance