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COBRA Subsidy Update – ARRA of 2009 March 13, 2009

Posted by Austin Baker in COBRA, employee benefits.
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Are you ready? Effective March 1st Uncle Sam will now pay 65% of COBRA Premiums.   You have until April 17th to issue new COBRA notices to all your employees and employees involuntarily terminated all the way back to September 2008.  This also applies to small business owners with 2-19 employees in specific states with ‘mini COBRA” laws.

The Facts

The duration of COBRA subsidized coverage  will pay a maximum of 9 months subsidy for COBRA coverage. Subsidy ends sooner if individual becomes eligible for coverage under another group health plan or Medicare. Total of 18 months of COBRA coverage is available in most cases, consistent with current law.

The amount of subsidy follows the following format.  Individuals pay 35% of COBRA premium and 65% of premium
is subsidized by employer (which the employer may then claim as a credit against wage withholdings and payroll taxes). The subsidy phases out for taxpayers with modified adjusted gross income exceeding $145,000 (or $290,000 for joint filers) and is reduced proportionately for taxpayers with adjusted gross income between $125,000 and $145,000 ($250,000 and $290,000 for joint filers).

There is a special election period? There is 60-day special election required for those eligible for the subsidy if they had not previously elected COBRA. Special election opportunity also applies to a qualified beneficiary who elected
COBRA coverage but who is no longer enrolled on the date of enactment.

Employees may have the option to change coverage to different plan offered by an employer. At the employer’s option, eligible individuals may be allowed to apply the COBRA subsidy to any health plan option offered by their employer to active employees, provided that the coverage has the same or lower premium as the individual’s continuation
coverage.

Employers may claim a tax credit against periodic deposits for wage withholdings and FICA payroll taxes for the portion of COBRA premium not paid by individual. If the employer’sclaims for COBRA subsidy payments exceed the amount of wagewithholdings or FICA payroll taxes reported by the employer,Treasury is directed to reimburse the employer directly for theexcess amount. Entities entitled to reimbursement must reportcertain information to the Treasury Department, includingattestations of involuntary termination for each coveredemployee and amounts of payroll taxes offset for the reportingperiod and estimated offsets for the subsequent reporting period.

Action Steps

1. Identify individuals eligible for COBRA who were terminated on an involuntary basis on or after September 1, 2008 and dependents of these individuals who previously became eligible for COBRA.
2. Revise and update COBRA communications materials, placing a priority on creating a notice for those terminated employees immediately entitled to a new COBRA enrollment period.
3. Notify all individuals within 60 days of the bill’s enactment of their new COBRA election period and of the availability of the premium subsidy (and, if applicable, other COBRA coverage options).
4. Coordinate with  payroll to revise systems and other procedures for paying the government’s 65% share of the COBRA premium and for reflecting the revised charges on premium statements sent to participants.
5. Coordinate with payroll and systems personnel to revise systems and other procedures for obtaining reimbursement of these amounts from the federal government.
6. Coordinate with payroll and systems personnel to revise systems and other procedures for determining participant premium over payments and crediting the payments to future premiums or returning the over payments directly to the participant.

7. Develop processes, procedures, and systems changes necessary to end the subsidy when the individual no longer is able to claim it and to reinstate the 100% COBRA premium charge if the individual continues to be eligible for COBRA after termination of the subsidy.
8. Determine whether the employer wishes to allow the former employee to switch to alternative health coverage for COBRA purposes.
9. If the employer currently pays for some portion of COBRA premiums, determine whether these payments should be restructured.
10. If significant reductions in force have been made since September 1 or may be made in the near future, determine how these new rules will affect COBRA claims experience and administrative costs for self-funded plans. If necessary, perform the actuarial calculations necessary to revise future plan rates.

11. Revise and update employee data capture procedures to update addresses on employees and dependents that could be eligible.

Helpful Websites

http://www.dol.gov/ebsa/cobra.html

http://www.irs.gov/newsroom/article/0,,id=204505,00.html

For Assistance with your Plan Please Contact- Find out how we can help keep you in Compliance!

Austin Baker

President EServ, LLC.

901-737-1023

austinb@eservbenefits.com

Sources: SHRM, AON, American Benefits Council, DOL, IRS

Small Businesses are affected by the new COBRA Subsidy March 13, 2009

Posted by Austin Baker in employee benefits.
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The clock has struck midnight.  The subsidy is available starting March 1st, yet many business owners do not understand that this new COBRA subsidy legislation may affect them regardless of their size.  For business owners with more than 20 FTE employees (Part time Count as 1/2) you are subject to COBRA.   Employers with 2-19 lives, you may be subject to “mini-COBRA” state laws sometimes known as state continuation of coverage.  Please see the listing below.   If so you need to immediately recalculate any payments being made by employees and reconcile any possible credits that should be offered.

Now more than ever it is important that you are prepared to notify benefit eligible employees currently in your organization and everyone that has any termination going back to September.  For ‘mini-COBRA” the window might vary based on the length of time required by the state.  Why do I say everyone with any instead of the “involuntary termination” rule that is in the act?  Every employer has a one shot window to notify all employees going back to Sept. 08′.  Would it not be better to notify everyone that they “could” be eligible and then deal with the gross misconduct terminations as they may come back to you with requests.

State Listings:

These laws are subject to change and the details on this page may not be current.

Arkansas: Act 997 of 1997 requires employers with 2-19 employees to offer COBRA for 4 months.

California: Cal-COBRA applies to employers with 2-19 employees and provides these employees 36 months of coverage.

Colorado: 2 employees in Colorado as of Jan 1, 1998, can get COBRA. if you are declined for coverage because of pre-existing conditions, you will be eligible for the Colorado Uninsurable Health Insurance Plan, called CUHIP. This is a state-run program for people in this situation.

Connecticut: Public Act 97-268 gives disabled individuals continuation benefits for 29 months, instead of the 36 months. Also, employees of any employer group policy to be offered COBRA for 24 months.

Florida: The Florida Health Insurance Coverage Continuation Act requires insurance companies to offer an 18-month continuation for groups of 2-19, but the employee has only 30 days to request this extension.

Georgia: Requires employers with 2-19 employees to offer COBRA for 3 months.

Illinois: The Illinois Continuation Law provides employees of any employer group policy to be offered COBRA for 18 months.

Iowa: Chapter 509B and Regulation 29 provide for continuation and conversion of group insurance. Employer plans of from 2-19 participants can qualify for 9 months

Kansas: Kansas Continuation law requires employers with 2-19 employees to offer COBRA for 6 months.

Kentucky: Chapter 304 of the Kansas Insurance Code provides employees of any employer group policy to be offered COBRA for 18 months.

Louisiana: Regulation 68 requires employers with 2-19 employees to offer COBRA for 12 months.

Maine: Requires employers with 2-19 employees to offer COBRA for 12 months.

Maryland: Maryland Continuation law provides employees of any employer group policy to be offered COBRA for 18 months.

Massachusetts: Massachusetts Mini-COBRA law requires employers with 2-19 employees to offer COBRA for 18 months.

Minnesota: Code 62 requires employers with 2-19 employees to offer COBRA for 18 months.

Mississippi: requires employers with 2-19 employees to offer COBRA for 12 months.

Missouri: Statute Chapter 376, Section 376.428 requires employers with less than 20 employees to offer COBRA for 9 months.

Nebraska: Offers a Comprehensive Health Insurance Pool for the uninsurable.

Nevada: Chapter 689B requires employers with 2-19 employees to offer COBRA for 18 months.

New Hampshire: State Bulletin 711, RE: Chapter 29 laws of 1994 requires employers with 2-19 employees to offer COBRA for 18 months.

New Jersey: Plans with 2-19 employees can qualify for 12 months of COBRA continuation coverage.

New Mexico: title 13, Chapter 10, Part 11.31 states that plans with 2-19 employees can qualify for 6 months of continuation coverage.

New York: Guaranteed Issue state law that requires insurers to cover anyone who applies. For more information visit this source: Source: http://www.ins.state.ny.us/faqcs1.htm#cobra

North Carolina: North Carolina State Continuation laws state that plans with 2-19 employees can qualify for 18 months.

North Dakota: If your employer has less than 20 employees, you will fall under North Dakota state law. This law identifies the specific rules and regulations to continue your group health coverage. Like COBRA, coverage is only temporary — 39 weeks.

Ohio: Section 3923.38 of the Ohio Revised Code states plans with 10-19 employees can qualify for continuation coverage.

Oklahoma: Oklahoma Statute title 36, Chapter 1, Article 45 states that plans with 2-19 employees can qualify for 1 month of guaranteed continuation.

Oregon: State continuation of coverage. You may be eligible to continue your group policy if your benefits are affected by termination from employment, dissolution of marriage or legal
separation, or you are a surviving spouse and you do not qualify for COBRA coverage. Your former employer must have 19 or fewer employees. A continuation-of-coverage policy will provide protection for a maximum of six months or until you are eligible for other coverage (including Medicare) whichever is shorter. The coverage may or may not include optional benefits such as vision, dental, or prescription coverage. Source: Oregon Consumer Guide to Health Insurance

Rhode Island: Chapter 27-20.4 Insurance Continuation Act states plans with 2-19 employees can qualify for 18 months of continued coverage.

South Carolina: Employees of employers with 2-19 employees can qualify for 6 months of continuation coverage.

South Dakota: Employees of employers with 2-19 employees can qualify for 18 months of continuation coverage.

Tennessee: Employees of employers with 2-19 employees can qualify for 3 months of continuation coverage.

Texas: Employees of employers with 2-19 employees can qualify for 6 months of continuation coverage. http://www.tdi.state.tx.us/consumer/cbo05.htm

Utah: Utah Code – title 31A, Chapter 30 states employees of employers with 2-19 employees can qualify for 6 months of continuation coverage.

Vermont: Employees of employers with 2-19 employees can qualify for 6 months of continuation coverage. http://www.bishca.state.vt.us/Regs&Bulls/insbulls/BUL78.htm

West Virginia: Employees of employers with 2-19 employees can qualify for 18 months of continuation coverage.

Wisconsin: Employees of employers with 2-19 employees can qualify for 18 months of continuation coverage.

Wyoming: Employees of employers with 2-19 employees can qualify for 18 months of continuation coverage.

I am not a practicing lawyer, so do not take this blog as legal advice.  However if you need assistance please call or email and I can help guide you through the adminstration process and provide consultative services to find the right vendor and button down your current processes to maintain compliance.