The model COBRA notices incorporating the new subsidy provisions have not yet been published by the federal Department of Labor (“DOL”). HEC members will be immediately notified when they are issued. In the meantime, the following information may be helpful.
Timeline:
• March 19, 2009 – Deadline for the DOL to publish the new Model COBRA notices, containing the new COBRA subsidy provisions.
• April 1, 2009 – Likely first day of coverage under the new COBRA subsidy requirements for assistance-eligible employees and their dependents who were given the new Model COBRA notices immediately after publication by the DOL, and who provided the employer with their 35% premium share in time for April coverage.
• April 2, 2009 – Last day for employers to provide the new COBRA subsidy notice to employees who were involuntarily terminated on February 17, 2009 (the effective date of the American Recovery and Reinvestment Act), as well as their spouse and dependent children. Employees terminated after February 17, 2009 must be provided with the new COBRA notices within the normal COBRA notice of election period, which is 44 days after the date of the employee’s termination. April 2, 2009 is 44 days after February 17, 2009.
• April 18, 2009 – Last day to provide the new COBRA subsidy notices to employees who were involuntarily terminated on or after September 1, 2008 up to February 16, 2009 (notices must also go to spouses and dependent children).
• March 1, 2009 to April 30, 2009 “grace period” – Assistance-eligible individuals (employees involuntarily terminated between September 1, 2008 and December 31, 2009 and their dependents), may pay their full COBRA premium for March and April 2009. These 2 months are a “grace period” allowed to enable employers to comply with the new COBRA subsidy.
However, if assistance-eligible individuals pay the full COBRA premium for their continuation coverage during March and April 2009, the 65% premium share which the employer must subsidize as of March 1, 2009 is treated as an overpayment, and the employer must either credit this overpayment towards the 35% employee share due for future COBRA coverage periods, or must reimburse the employee directly for the 65% share overpayment.
DOL webpage on COBRA under the American Recovery and Reinvestment Act of 2009
http://www.dol.gov/ebsa/COBRA.html
Joint Explanatory Statement of the Committee of Conference on the COBRA Premium Reduction Provision
http://www.dol.gov/ebsa/pdf/JointStatementCOBRAPremiumReduction.pdf
IRS COBRA webpage:
http://www.irs.gov/newsroom/article/0,,id=204505,00.html
IRS FAQ on COBRA Subsidy:
http://www.irs.gov/newsroom/article/0,,id=204708,00.html
Employer quarterly federal tax return Form 941 (including COBRA subsidy entries)
http://www.irs.gov/pub/irs-pdf/f941.pdf
Instructions for completing Form 941 (including items 12a, 12b, 13, involving COBRA subsidy)
http://www.irs.gov/pub/irs-pdf/i941.pdf
