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NEWS DETAILS
| COBRA Changes Affect Nonprofits |
| 3/11/2009 |
| COBRA changes resulting from Stimulus Package
On February 17, 2009, President Obama signed into law the American Recovery and Reinvestment Act (herein referred to as "The Act"). The Act includes changes to the health benefit provisions of the Consolidated Omnibus Budget Reconciliation Act of 1985, commonly referred to as COBRA. This new law will affect former employees, their families, employers and others involved in providing COBRA coverage.
As a client of CS Plus, we wanted to make you aware of the impact of The Act and make you aware of the provisions of the plan that will affect your COBRA administration and COBRA eligible employees.
Please note that while The Act provides some clear provisions and guidelines, many questions and details have not been addressed and may take some time to answer. Here is what we know so far;
The Act provides up to 65% subsidy for COBRA eligible employees who were (or are) involuntarily terminated between September 1, 2008 and December 31, 2009.
The subsidy applies to Qualified Beneficiaries in two instances;
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Qualified beneficiaries that experienced an involuntary termination of employment and subsequently elected COBRA continuation coverage on or after September 1, 2008, but prior to February 17, 2009 (the "Enactment Date"), are eligible to receive the subsidy on a going-forward basis beginning on the enactment date.
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Qualified beneficiaries that experienced an involuntary termination of employment between September 1, 2008, and February 17, 2009 and did not elect COBRA coverage during their initial 60-day election period must be provided another opportunity to elect COBRA coverage during a second 60-day election period. This second election period also applies to those individuals who elected COBRA coverage but have subsequently lost that coverage prior to the enactment date (e.g., due to non-payment of premiums).
The effective date for both the premium subsidy and the subsequent effective date (in the case of #2) is 3/1/09.
Employers must notify all individuals who meet the guidelines in #1 of these changes to their rights on or before 4/18/09.
The subsidy and notice obligations will continue until 12/31/2009.
Employers will invoice COBRA eligible employees for 35% of the COBRA premium and remit 100% of the medical premium to their health insurance carriers on behalf of COBRA enrollees. Employers then will be able to take a credit equal to 65% of COBRA premiums paid on their payroll tax form 941 (thus the employer is reimbursed the 65% they sent in to the carrier). A new IRS 941 form has been made with added lines for employers (or payroll remitters) to subtract this money paid from the payroll taxes owed.
While the American Recovery and Reinvestment Act is now law, there are still many questions that need to be answered and we expect more guidance forthcoming. CS Plus will be tracking important announcements and make that information available to our clients so they can keep up to date with this important legislation.
Please feel free to contact us with any questions or concerns you have regarding your obligations or employee questions. Thanks for working with us. We appreciate the opportunity to be of service to you.
Peter Andrew, CEO
Council Services Plus
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