NEW COBRA SUBSIDIES UNDER THE ARRA
EMPLOYERS REQUIRED TO TAKE PROMPT ACTION
On February 17, 2009, President Barack Obama signed into law the American Recovery and Reinvestment Act of 2009 (“ARRA”), commonly known as the Economic Stimulus package. One of the key provisions of the ARRA provides for a subsidy of COBRA benefits. Employers advance this subsidy for payment of COBRA premiums, which is thereafter reimbursed through a credit against the employer’s payroll taxes. If the subsidy exceeds the employer’s liability for payroll taxes, the IRS will reimburse the employer such amount. The Act provides for a 65% premium subsidy for up to 9 months of COBRA benefit continuation coverage for qualified beneficiaries who were “involuntarily terminated” from their employment (including for poor job performance) between September 1, 2008 and December 31, 2009. This premium reduction applies to periods of health coverage beginning on or after February 17, 2009.
The Act also provides for an additional election opportunity for health benefits under COBRA.
Included in the Act is a provision which allows higher paid individuals to waive their right to a COBRA premium subsidy.