AZ USA: Tuesday, February 17 - 2009
Economic Stimulus bill will change the way you administer COBRA.
A Brief Over-View:
The Economic Stimulus bill that President Obama is expected to sign today in Denver Colorado includes major changes to how you will administer COBRA. The bill will allow anyone who experiences an involuntary loss of coverage between September 1, 2008 and December 31, 2009 to pay 35% of their COBRA premium for up to 9 months.
Previously terminated employees who experienced an involuntary loss of coverage and did not elect (possibly those who elected and already dropped-coverage as well) to continue coverage under COBRA will be allowed a new 60-day election period with a COBRA start date of 3/1/2009. In the event that this causes laps in coverage greater than 63-days, penalties for lack of continuation of coverage will be waived and no preexisting condition limitation will be imposed.
New COBRA Qualifiers who experience an involuntary loss of coverage between now and December 31, 2009, must be informed of the new stimulus bill information in their qualifying event letter.
Current COBRA participants who experienced an involuntary loss of coverage after September 1, 2008 should be notified of the decrease in premiums. The premium stimulus will NOT be retroactive and will begin on March 1, 2009. If premiums have already been received for months effected by the stimulus package, a credit should be applied to the participants account.
Companies will have 60-days from the time the bill is signed, to produce new Qualifying Event Notices that explain their COBRA election process. As with regular qualifying event letters, it is advised to send new notices as soon as possible. Reimbursement of the subsidy will come via your payroll taxes (form 941). You may not apply for reimbursement until the premium payment is received from the COBRA participant.
Software Changes:
COBRA Solutions is currently re-programming the COBRA Administration Manager
software to reflect all the changes of the Economic Stimulus bill. In fact, we
plan to release our first update (version 11.3) tomorrow morning (02/18/09),
which will include a new report that will help you collect information on
previously terminated employees and COBRA Participants. After which, we expect
to release the final version containing the new amendments March 1, 2009.
The new Report “Government Stimulus Eligibility Report” will be found under "COBRA Reports" under the “Reports” menu option and if you run our TPA version, it will also be available under the “Print Reports for Multiple Groups” procedure. After producing the report, you will want to identify all the ex-employees who were termed involuntarily.
Highlights:
- 65% subsidy is available to individuals who experienced an involuntary loss of coverage between September 1, 2008 and December 31, 2009 for up to nine (9) months.
- The subsidy is not retroactive.
- Individuals who experienced an involuntary loss of coverage and did not elect COBRA will be given a new 60-day election period.
- The subsidy applies to all levels of coverage (e.g. Single, Two-Party, Family, etc.).
- The subsidy is available for all group health plans currently available under COBRA, with the exceptions of a Flexible Spending Account.
- COBRA coverage will not be extended further than the original 18 months from the original COBRA start date.
- Employees whose gross adjusted income is greater than $125,000 (or $250,000 if married) are not eligible for the subsidy.
- If the employer offers multiple plans, the participant may be allowed to switch plans if the other available plan is less expensive (gray area).
- The employer will initially pay 65% of the premium and then recover the subsidy through their Employee tax withholdings.