Posts Tagged ‘COBRA’

New Fact Sheet on COBRA State Continuation Stimulus for Illinois

Tuesday, December 29th, 2009

Please find the original at http://bit.ly/7b6Wlx

Illinois Insurance Facts

Illinois Department of Insurance

Federal Stimulus – Premium Reduction for Group Continuation Coverage

Updated December 23, 2009

Note: This information was developed to provide consumers with general information and guidance about insurance coverages and laws. It is not intended to provide a formal, definitive description or interpretation of Department policy. For specific Department policy on any issue, regulated entities (insurance industry) and interested parties should contact the Department.

On February 17, 2009, President Barack Obama signed the American Recovery and Reinvestment Act (“ARRA”), commonly called the Stimulus Plan. ARRA provides a subsidy that may reduce by 65% the cost of COBRA and other state group continuation coverage for workers who lose their jobs.

On December 19, 2009, President Obama signed Public Law 111-118 (the “ARRA Subsidy Extension”), which amended ARRA to increase the maximum duration of the subsidy from 9 to 15 months, and to extend the eligibility period from December 31, 2009, to February 28, 2010.

What Are Group Continuation Laws?

Group continuation laws require employers to offer employees who lose group coverage the opportunity to continue their employer-based health insurance.

•COBRA is the federal law that applies to employer groups with 20 or more full-time employees on more than 50% of the business days in the prior calendar year, and to group plans offered by state and local governments.

•State continuation law (“mini-COBRA”) applies to fully insured group plans of any size, including employers with 19 or fewer employees.

If you are uncertain about which law(s) applies to your group plan, contact your employer or the U.S. Department of Labor at 1-866-444-3272.

NOTE: This fact sheet focuses on the premium reductions provided under ARRA. For more detailed information about your rights under federal and state continuation laws, including recent changes to the State mini-COBRA law made by Public Act 096-0013 (signed into law by the Governor on June 18, 2009), please refer to the Department of Insurance consumer fact sheets titled “Health Insurance Continuation Rights – COBRA” and “Health Insurance Continuation Rights – Illinois Law.”

When an Employee Loses Group Coverage and Elects Continuation, Who Pays the Premium?

Normally it is the employee who lost group coverage, not the employer, who must pay the entire health insurance premium.

Who is Eligible for Premium Reductions Under ARRA?

Individuals who lose group health coverage because of an involuntary termination (“former employees”) between September 1, 2008, and February 28, 2010, may be eligible for a 65% reduction of their COBRA or mini-COBRA premiums for up to 15 months.

The premium reduction is not available to workers whose modified adjusted gross income in the year they receive the premium reduction exceeds $145,000 for individuals and $290,000 for couples filing joint tax returns. The premium reduction will be phased out for individuals whose modified adjusted gross income is between $125,000 and $145,000 and for couples between $250,000 and $290,000. If an individual takes advantage of the premium reduction and in the same year exceeds the income limit, he or she must repay the amount of the premium reduction. We encourage individuals and couples to confirm eligibility with a tax specialist.

Who Will Benefit from the ARRA Subsidy Extension?

P.L. 111-118, enacted on December 19, 2009, extended the maximum duration of the premium reduction from 9 to 15 months. Even those individuals who, prior to the enactment of P.L. 111-118, lost eligibility for the premium reduction due to the end of the 9-month period may be eligible for the additional 6 months of subsidized premiums.

•Eligible individuals who chose to continue coverage after the 9-month premium reduction period must receive a refund or credit for premiums paid in excess of the reduced premium rate.

•Eligible individuals who did not pay the premium for a period of coverage beginning after the 9-month premium reduction period must be allowed to continue their coverage by making a retroactive payment. Such payment must be made by February 17, 2010, or within 30 days of receiving the notice described below, whichever is later.

How Do Individuals Sign Up for the Premium Reduction?

Eligible individuals will receive a notice with general information about the premium reduction under ARRA and a form to request the premium reduction.

For group plans subject to federal COBRA requirements, written notice must be provided by the former employer.

•Former employees who lose group health coverage will receive notification and enrollment forms allowing them to continue their group coverage and to request the premium reduction.

For group plans subject only to state mini-COBRA requirements (i.e., employers with 19 or fewer employees), written notice must be provided by the insurer providing coverage under the group plan.

•Former employees who lose group health coverage will receive written notice allowing them to request the premium reduction. This notice must be provided within 10 days of the involuntary termination.

The ARRA Subsidy Extension (P.L. 111-118) requires insurers and employers to provide additional information to former employees about the changes made by the new law, including the extension of the premium reduction period and the option for eligible individuals to make retroactive premium payments. Guidance for insurers and employers on these new notification requirements can be found on the Department’s website at http://insurance.illinois.gov/ModelNotices/COBRA.

If you have questions about the notices described above, you can contact your former employer or the insurer providing coverage under your group health plan. For plans subject to federal COBRA requirements, you may also contact the federal Department of Labor at 1-866-444-3272 or visit the agency’s website (http://www.dol.gov/ebsa/COBRA.html). For plans subject only to state mini-COBRA requirements, you may contact the Illinois Department of Insurance (“Department”) at 1-877-527-9431 or visit our website at http://insurance.illinois.gov/ModelNotices/COBRA.

MODEL NOTICES:

•The Department of Labor (DOL) has published Model Notices for employers to use when providing the notifications required by ARRA. Employers can download copies of these Model Notices from the DOL website at http://www.dol.gov/ebsa/COBRAmodelnotice.html.

•The Department of Insurance has created a state-specific Model Notice for use by insurers providing coverage subject only to state mini-COBRA requirements. These model notices are available on the Department’s website at http://insurance.illinois.gov/ModelNotices/COBRA/.

How will the Premium Reduction be Applied to Group Continuation Coverage?

Former employees who qualify for the premium reduction will only be required to pay 35% of the group coverage continuation premium. The remaining 65% will initially be paid by:

• the former employer, if the employer had 20 or more employees on more than 50% of the business days in the prior calendar year and is subject to federal COBRA provisions; or

• the insurer providing coverage under the group health plan, for those employers with fewer than 20 employees subject solely to mini-COBRA requirements.

The former employer or the insurer will then be reimbursed by the federal government through a reduction in payroll taxes.

What if an Employer or Insurer Refuses to Provide the Premium Reduction?

ARRA provides for expedited reviews if an employer or insurer denies an individual’s application for the premium reduction. Once the denied individual submits an appeal for review, the Department of Labor or the Center for Medicare and Medicaid Services (CMS) will make an eligibility determination within 15 business days.

DOL will handle appeals related to private sector employers subject to federal COBRA provisions (i.e., employers with 20 or more employees). For more information or to submit an appeal, please visit the DOL’s website at http://www.dol.gov/ebsa/COBRA/main.html or call a DOL benefits advisor toll-free at (866) 444-3272.

CMS will handle appeals related to state mini-COBRA plans, as well as appeals for Federal, State, or local governmental employees. For more information or to submit an appeal, please contact the CMS-sponsored help desk toll-free at (866) 400-6689 or via e-mail at continuationcoverage@maximus.com.

Will Individuals be Eligible for the Premium Reduction for as Long as They Are Eligible for Group Continuation Coverage?

The premium reduction will not necessarily last as long as your group continuation coverage. For example, former employees typically qualify for up to 18 months of federal COBRA coverage. The premium reduction lasts only up to 15 months. Therefore, an eligible individual who chooses to pay for 18 months of COBRA coverage would still have to pay 3 months of unsubsidized premiums.

Can an Individual Lose Eligibility for the Premium Reduction?

You can lose eligibility for the premium reduction in two ways. First, the premium reduction lasts only as long as you are eligible for group continuation coverage, but in no event longer than 15 months. Second, you become ineligible for the premium reduction when you become eligible for new group health coverage or Medicare.

•Beneficiaries must notify their former employer when they become eligible for new group health coverage.

•Beneficiaries who willfully neglect to notify their former employer of their eligibility for a new group health plan must repay 110% of the amount of the premium reduction to the federal government. No such penalty shall be imposed if the beneficiary demonstrates “reasonable cause” for the failure.

NOTE: Eligibility rules for the premium reduction differ from rules governing eligibility for COBRA coverage generally. Eligibility for COBRA continuation coverage ends only when a beneficiary enrolls in new group coverage or Medicare. However, simply being eligible for new group health coverage disqualifies an individual from receiving the premium reduction.

Does the Premium Reduction Apply to Group Continuation Coverage other than COBRA?

The premium reduction under ARRA applies to both federal COBRA continuation coverage and to comparable state continuation coverage known as “mini-COBRA” (215 ILCS 5/367e). ARRA does not apply to the state’s spousal continuation law or dependent continuation law. For more information about these laws, please refer to the Department of Insurance consumer fact sheet titled “Health Insurance Continuation Rights – Illinois Law.”

Does ARRA Extend the Length of Available Group Continuation Coverage?

ARRA itself does not change the length of time that group continuation coverage must be provided to eligible individuals: COBRA typically provides for up to 18 months of coverage, while mini-COBRA had provided for up to 9 months of coverage.

The period of coverage required under the state mini-COBRA law, however, was recently increased from 9 months to 12 months by Public Act 96-0013. All group plans subject to the law that are issued, delivered, amended or renewed after June 18, 2009, must provide for up to 12 months of continuation coverage. If an individual is currently receiving mini-COBRA coverage and the employer’s policy is renewed after June 18, 2009, the individual would be entitled to the additional 3 months of coverage, regardless of the date the individual first elected mini-COBRA coverage.

Who is Eligible for a Second Opportunity to Continue Group Coverage and Receive the Premium Reduction?

ARRA required a “second election period” so that former employees who lost group coverage prior to ARRA’s enactment and who initially chose not to continue their coverage, or chose to continue coverage and later stopped paying premiums, were given a second chance to continue their group coverage and receive the premium reduction. Individuals whose former employer is subject to federal COBRA provisions (i.e., employers with 20 or more employees) and who lost group coverage due to an involuntary termination that took place between September 1, 2008 and February 16, 2009, should have received notice of this second election period from their former employer by April 18, 2009. Former employees then had 60 days after receiving this notice to elect continuation coverage and request the premium reduction.

After the enactment of ARRA, Illinois passed a law (Public Act 096-0013) providing a similar second election period for Illinois employees of small businesses (i.e., employers with 19 or fewer employees). Former employees who lost group coverage due to an involuntary termination that took place after September 1, 2008, and who did not have continuation coverage in effect as of June 18, 2009, were eligible for this second election period. These individuals should have received notice from the insurer providing group coverage by July 18, 2009, and would then have 60 days after receiving notice to elect continuation coverage and request the premium reduction.

If you believe you were eligible for the second election period and did not receive notice, you can contact your former employer or the insurer providing coverage under your group health plan. For plans subject to federal COBRA requirements, you may also contact the federal Department of Labor at 1-866-444-3272 or visit the agency’s website (http://www.dol.gov/ebsa/COBRA.html). For plans subject only to state mini-COBRA requirements, you may contact the Illinois Department of Insurance (“Department”) at 1-877-527-9431 or visit our website at http://insurance.illinois.gov.

Does the Premium Reduction Affect Eligibility for other Income-Based Government Programs?

The amount of the premium reduction will not be counted as income in determining eligibility for, or assistance provided under, any other federal or state program.

Does ARRA Affect Individuals Who Qualify for COBRA Due to Eligibility for Trade Adjustment Assistance or Eligibility for Benefits from the Pension Benefit Guaranty Corporation?

ARRA provides significant extensions of COBRA coverage periods for individuals who receive benefits directly from the Pension Benefit Guaranty Corporation or are eligible for Trade Adjustment Assistance. If you have additional questions about these extensions, contact the federal Department of Labor at 1-866-444-3272 or visit the agency’s website (http://www.dol.gov/ebsa/COBRA.html).

For More Information

Call the Department of Insurance Consumer Services Section at (866) 445-5364 or our Office of Consumer Health Insurance at (877) 527-9431 or visit our website at http://insurance.illinois.gov

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Tags: American Recovery and Reinvestment Act, ARRA, COBRA, COBRA Stimulus, continuation, Health Insurance, illinois stimulus, state continuation
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Legislative Update on Health Care Reform from NAHU

Friday, July 31st, 2009

Robert Slayton Associates Insurance believes the comprehensive health reform legislation working its way through Congress would have a profound impact on our clients. Working through our professional trade association, the National Association of Health Underwriters, we bring you this update on the latest happenings and means to contact your legislators on this critical issue.

Legislative Action in the House of Representatives

It was quite a busy week for health care reform negotiations in Washington. After a week of intense talks between the House Democratic leadership and the conservative Blue Dog Democrats Coalition, a deal appears to have been struck between the two groups of Democrats, and the Energy & Commerce Committee is expected to report a bill out of Committee with unified Democratic support on July 31. The bill will include what is being billed as the “Unity Amendment,” which includes concessions from both sides of the Caucus.

The other two committees of jurisdiction, the Ways & Means Committee and the Education and Labor Committees finished their versions of H.R. 3200 two weeks ago, and the initial goal was to report the measure out of Energy & Commerce last week and pass the entire measure on the House floor this week. However, the dispute with the Blue Dogs delayed the Energy & Commerce Committee mark-up, and now the House floor vote is delayed until Congress reconvenes in September.

The fate of H.R. 3200 and the efforts of the Blue Dogs when the three committee bills are merged together still remain under debate. There is some concern that agreements made with the Blue Dogs in the Energy & Commerce Committee will not be honored when the bill reaches the House Rules Committee in September. Over 57 progressive Democrats have signed a letter stating that they will not support earlier concessions promised to the Blue Dogs if they are brought the House floor, and Speaker Pelosi has indicated her support for the Progressive Caucus. The deal struck today is intended to alleviate this concern, but in reality the political climate after the August recess will have much to do with how the bills are “married” together as well.

Senate Finance Committee Will Not Mark Up Bill Until September

Over in the Senate, the bipartisan negotiation between Republican Senators Enzi, Grassley and Snowe and Committee Democrats has slowed, and Finance Committee Chairman Max Baucus (D-MT) announced on July 30 that the committee will not be able to mark up their version of health care reform legislation before the Senate adjourns for its August recess on August 7. The Finance Committee legislation, which is still being drafted, may not even be available for public release before the Senate adjourns next week. This delay, particularly when coupled with the deal reached in the Energy & Commerce Committee, raises the question of how long the Democrats will continue to allow the bipartisan negotiations to continue.

Brining Health Care Messaging to the Public Will be the Focus of the August Congressional Recess

With the August congressional recess set to begin, it is clear that Republicans and Democrats alike view the recess as the high water mark for health care reform. Sliding personal poll numbers for President Obama are a factor, as is a decline in public support for Democratic health care efforts. A Pew Research Center poll released Thursday that found that 44 percent oppose “health care plans currently before Congress,” while just 38 percent favor the plans. In a NBC/Wall Street Journal Poll, 42 percent now say that the president’s plan is a bad idea, a 10-point increase since last month.

Republicans and some conservative Democrats are interpreting those declining numbers as lack of public support for overwhelming change. Instead, they believe that the public favors more deliberative and targeted reform, perhaps on an incremental basis. Their strategy for the August recess is mammoth public education on the realities of a government-run public plan option and other costly and intrusive elements of the Democratic bills, as well as the need to “get health reform right.”

But Democratic leaders are interpreting these polls as only a failure of messaging, and plan to ramp up their campaign efforts into as high as gear as possible during the August recess. Their focus seems to be on targeting insurance companies as the villains, beginning with a pronouncement from House Speaker Pelosi earlier in the week. “It’s almost immoral what they are doing,” she told reporters. “They are the villains. They have been part of the problem in a major way.”

They also want to use the time clear up what they view as public misconception about their work. This week House Majority Leader Steny H. Hoyer (D-MD), conceded that Democrats have much ground to make up in August and need to focus on how their ideas would benefit the public if the party is to succeed on health reform. “We’re responsible for putting together a plan, and so we’ve been focused on that,” he said. “Republicans have been somewhat free to conjure up whatever they want.”

Grassroots Call to Action: Make Sure Health Reform is Done Right

Health reform is needed, but it needs to be both affordable and responsible, and it also should be crafted in a bipartisan way. This measure is the most consequential to be considered by Congress in decades—it will impact all citizens and change the scope of one-sixth of our nation’s economy. It’s crucial that we don’t let our congressional leaders rush to judgment on this measure. Instead, we need to urge them to spend August discussing the bill with their constituents, and then make changes to their bills when they reconvene in September to reflect the will of American employers and health care consumers. Click here to send a message to your legislators to let them know that you would like them to take the time to craft bipartisan comprehensive health care reform that will work for all Americans. Also, consider joining this coalition of concerned Americans dedicated to “getting health care reform right!”

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Tags: COBRA, Employee Benefits, health care, health care reform, Health Insurance, health insurance reform, Legislative, Uninsured
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New Law Impacts Small Illinois Employers who offer Health Insurance

Thursday, June 25th, 2009

House Bill 2325 was signed into law on June 18,2009. It does two things that will impact you as an employer.

CHANGES

1. State Continuation has been expanded for 3 additional months to 12 months of total coverage.This change will go into effect at your renewal date (from 7/1/2009 renewals on).

2. New notification laws. You have 10 days to give an terminated employee notice of their rights to continue coverage and they now have 30 days within which to respond (they are required to respond in writing). Lack of timely notification can result in a $500 fine.

If you use a service, they should already know about these changes. If this terminated employee is eligible for the subsidy, then the insurance company is required to handle the notifications. If you fall into this category, I recommend taking the following action (as I’ve seen insurance companies screw up this part):

DOCUMENTATION OF TIMELY NOTICE

Print out a sheet stating that the employee/family is eligible for either 9 or 12 months of coverage (depending upon whether your group plan renewal has happened after 6/18/2009) and that this person has 30 days to elect this coverage in writing. Use the “Model ARRA Notice” and modify it for state continuation and the notification guidelines. Find it here: http://www.dol.gov/ebsa/COBRA.html. You can also request a copy of what your current COBRA service uses and provide it yourself.

TWO COPIES – ONE FOR YOU, ONE FOR THEM

Furnish two copies of this notice. One that the terminated employee must sign and date at the time of termination. The second copy they bring home. This will help you avoid the new $500 penalty.

NOTE: I am not an attorney or an expert on these notifications. To be perfectly compliant, check with your COBRA/State Continuation provider or attorney for specific language.

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Tags: COBRA, COBRA Stimulus, cobra subsidy, Employee Benefits, HB2325, Health Insurance, illinois, Legislative, Mini-Med, state continuation
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COBRA Stimulus doesn’t include Special Election Period for Employer Groups under 20 Employees

Monday, April 6th, 2009

NO SPECIAL ENROLLMENT PERIOD

Through further discussions with attorneys and legislative people, the American Recovery and Reinvestment Act does not call for a special election period for those companies who fall under State Continuation (Mini-Med) guidelines.

What this means is that if you didn’t elect State Continuation originally, you will not be allowed to elect it now.

WRINKLE IN THE ACT

Some states are trying to pass laws that would allow this special enrollment period and I’ve heard (but been unable to verify) that some health insurance companies are allowing this special enrollment period. I know the state of California is trying to pass an act as this is written.

More facts as I get them.

Robert Slayton

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Tags: American Recovery and Reinvestment Act, COBRA, COBRA Stimulus, Employee Benefits, Health Insurance, Mini-Med, state continuation, Uninsured
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Many insurance carriers are paying the 65% COBRA Stimulus for small businesses

Monday, March 23rd, 2009

In many states, State Continuation (companies with less than 20 employees) is administered by the health insurance company. I have had several of my health insurance carriers state that they would pay for the 65% subsidy and take that money off their own 941 forms.

What this means

Small businesses don’t have to shoulder the burden of paying for qualified beneficiaries of the COBRA Stimulus package. This takes a large monetary burden off of a business, especially if their 941 receipts would not have covered the full amount of the subsidy.

What Should a Business Owner Do

You should immediately contact either your agent or insurance company and ask if your insurance company will be paying the 65% subsidy. If this is the case, the you (the small business owner) will still be responsible for collecting 35% of the premium and forwarding it to the insurance company.

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Tags: 941 form, American Recovery and Reinvestment Act, benefits, COBRA, COBRA Stimulus, Employee Benefits, Employer Sponsored Group Health Insurance, Health Insurance, small business, state continuation
Posted in COBRA, Employee Benefits, Health Insurance, Legislative | 2 Comments »

Cobra Stimulus Model Notices Posted

Thursday, March 19th, 2009

The following updates to http://www.dol.gov/ebsa/COBRAmodelnotice.html were just posted:

- Model notices

- FAQs for Employers on the COBRA Premium Reduction

- Expanded FAQs for Employees on the COBRA Premium Reduction

- Updated FAQs for Employees on General COBRA Provisions

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Tags: American Recovery and Reinvestment Act, benefits, COBRA, COBRA Stimulus, Employee Benefits, employer benefits, Health Insurance
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Notification Guidelines for COBRA Stimulus don’t apply to small groups (under 20 employees)

Monday, March 9th, 2009

Here’s the latest interpretation. If you previously worked for an employer with less than 20 employees, were laid off (and qualify for the employer paying 65% and you paying 35% of the premium), your employer DOES NOT have to contact you about this subsidy unless you are currently on State Continuation.

WHAT THIS MEANS

You need to contact your former employer if you want to take advantage of the subsidy. Small groups are covered, but not the notification requirements for those not currently taking the state continuation plan.

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Tags: American Recovery and Reinvestment Act, ARRA, COBRA, COBRA Stimulus, group benefits, Health Insurance, Notification Guidelines, Uninsured
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Specifics on How Employers will Recover the 65% Subsidy

Wednesday, March 4th, 2009

Originally posted on February 28th, 2009

The following is taken directly from the IRS website. It is well written. Here’s the originating link: http://tr.im/erreimburse

COBRA: Answers for Employers

IRS Information Related to Tax Under the American Recovery and Reinvestment Act of 2009, certain individuals who are eligible for COBRA continuation health coverage, or similar coverage under State law, may receive a subsidy for 65 percent of the premium. These individuals are required to pay only 35 percent of the premium. The employer may recover the subsidy provided to assistance-eligible individuals by taking the subsidy amount as a credit on its quarterly employment tax return. The employer may provide the subsidy — and take the credit on its employment tax return — only after it has received the 35 percent premium payment from the individual.

Q: How will an employer be reimbursed for the COBRA subsidy that it has provided to eligible individuals?

A: The COBRA subsidy amount is reimbursed by being claimed as a credit on the Form 941. The Form 941 has been revised to allow for this credit.

Q: How does an employer claim the credit for the COBRA subsidy?

A: The credit is claimed on Line 12a of the January 2009 revision of the Form 941, which was posted on the IRS website on Feb. 20. In addition, the Form 941 filer also needs to include the number of individuals provided COBRA premium assistance on Line 12b.

Q: What other information relating to the COBRA subsidy must be submitted with the Form 941 besides the entries on Lines 12a and 12b?

A: No additional information relating to the COBRA subsidy is to be submitted with the Form 941, either electronically or in paper form. However, those claiming the credit must maintain supporting documentation for the credit claimed. Such documentation includes, but is not limited to:

· Information on the receipt, including dates and amounts, of the assistance eligible individuals’ 35% share of the premium.

· In the case of an insured plan, copy of invoice or other supporting statement from the insurance carrier and proof of timely payment of the full premium to the insurance carrier required under COBRA.

· In the case of a self-insured plan, proof of the premium amount and proof of the coverage provided to the assistance eligible individuals.

· Attestation of involuntary termination, including the date of the involuntary termination (which must be during the period from September 1, 2008, to December 31, 2009), for each covered employee whose involuntary termination is the basis for eligibility for the subsidy.

· Proof of each assistance eligible individual’s eligibility for COBRA coverage at any time during the period from September 1, 2008, to December 31, 2009, and election of COBRA coverage.

· A record of the SSN’s of all covered employees, the amount of the subsidy reimbursed with respect to each covered employee, and whether the subsidy was for 1 individual or 2 or more individuals.

· Other documents necessary to verify the correct amount of reimbursement.

Q: The employer paid the bill and took the credit for March. In April the employer finds out that the employee did not continue his/her coverage (i.e., did not pay the 35 percent). The credit element must be allowed to be a negative, which would increase the deposit due.

A: The premium subsidy and the related credit for the employer apply only after the individual has paid his or her 35 percent of the premium, so this situation should not occur.

Q: I haven’t seen the legislation, but why does this belong on the Form 941?

A: The legislation as passed provides for reimbursement of the subsidy through the employment tax process, so Form 941 is the applicable form.

Q: What will happen if Line 12a ends up being larger than Line 10 on a 941 return? Will this result in a net negative of taxes for a company?

A: If Line 12a is larger than Line 10, Line 13 would also be larger than Line 10, resulting in an overpayment that could be applied to the next return, or requested as a refund.

Q: Is the IRS considering any other form changes (e.g., 941X)?

A: Yes. All appropriate forms are being revised and will be updated on the IRS.gov web site as soon as possible.

Q. Will the due date for the first-quarter Form 941 be extended?

A: No, the due date for the first quarter 2009 Form 941 is not being extended.

Q: Would the number of beneficiaries need to be reported each quarter, whether or not there was a tax credit amount to apply?

A: Line 12b of the revised Form 941 must indicate the number of individuals who received the total COBRA subsidy reported on Line 12a of the Form 941. If there is no tax credit amount because no subsidy was provided, then the entry on Line 12b would be zero.

Q: Now that the legislation has passed, how is this going to be communicated to the employer/payroll community?

A: The IRS will continue to provide updated information through this Web site as it becomes available.

Q: Can an employer decide only to claim the credit at the end of the quarter rather than reducing its tax deposits during the quarter?

A: Yes. The employer can decide either to offset its payroll tax deposits or claim the subsidy as an overpayment at the end of the quarter.

Q: When does the law become effective?

A: The law became effective on the date of enactment, Feb. 17, 2009. However, under a transition rule, the regular premium amount may continue to be paid for up to two months after enactment (e.g., for March and April), and the subsidy can be provided retroactively.

Q: It was mentioned that this would be a temporary statute. How long is this change expected to be in effect?

A: For assistance-eligible individuals, the qualifying event must occur on or before Dec. 31, 2009, and the COBRA subsidy may apply for up to nine months.

Q: What individuals are eligible for the COBRA subsidy?

A: An assistance-eligible individual can be any COBRA qualified beneficiary associated with the related covered employee, such as a dependent child of an employee, who is covered immediately prior to the qualifying event. The qualifying event for purposes of eligibility for the subsidy is involuntary termination of the covered employee’s employment that occurs during the period beginning Sept. 1, 2008, and ending Dec. 31, 2009. The individual must also be eligible for COBRA coverage, or similar state coverage, during this period.

Q: Is this provision for employees who involuntarily lose their jobs — or will it apply to all employees even if they leave voluntarily?

A: The credit applies only to involuntarily terminated employees and their family members who are qualified beneficiaries.

Q: Will the COBRA premium subsidy be taxable income for the individual?

A: The premium subsidy is not included in the individual’s income. However, there is a phase-out of eligibility for the subsidy, which will increase some high-income individuals’ tax liability if they receive the subsidy. The phase-out impacts individuals whose modified adjusted gross income exceeds $125,000, $250,000 for those filing joint returns. Tax liability is increased, to achieve repayment of a portion of the subsidy, for those taxpayers whose modified adjusted gross income is between $125,000 and $145,000, or $250,000 and $290,000 for those filing joint returns. If a taxpayer’s modified adjusted gross income exceeds $145,000, $290,000 for those filing joint returns, the full amount of the subsidy must be repaid as an additional tax. There is no additional tax for individuals with modified adjusted gross income less than these income levels.

Q: When more than one entity may be responsible for receiving COBRA premiums, who should claim the credit?

A: The law as enacted clarifies that the person to whom the reimbursement is payable is (1) the multiemployer group health plan, (2) the employer maintaining a group health plan that is subject to Federal COBRA continuation coverage requirements or that is self-insured, or (3) the insurer providing coverage under a plan not included in (1) or (2). Only this person is eligible to offset its payroll taxes by the amount of the subsidy.

Q: Is the employer required to provide the COBRA subsidy?

A: The subsidy requirement applies to group health plans that are subject to the Federal COBRA continuation coverage requirements or to similar requirements under State law. If you are an employer with such a plan and you receive a 35 percent payment from an assistance-eligible individual, you are required to make the remaining 65 percent payment.

Q: What if the employer’s group health plan is self-insured? Do the subsidy requirements apply?

A: Yes, the subsidy requirements apply to all plans subject to the COBRA requirements, including self-insured plans. In that case, the employer must provide the COBRA coverage if the assistance eligible individual pays 35 percent of the otherwise required premium. The remaining 65 percent is treated as a payment of payroll taxes by the employer maintaining the plan.

Q: What other agencies will provide information about the COBRA subsidy?

A: Information about the COBRA subsidy will also be available through the Department of Labor and the Department of Health and Human Services, which, along with the IRS, share responsibility for the COBRA requirements.

Visit the Department of Labor Web site for information related to COBRA eligibility and the subsidy. Benefits Advisors are also available to assist you at 1-866-444-3272.

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Tags: American Recovery and Reinvestment Act, COBRA, cobra subsidy, Employee Benefits, Health Insurance, stimulus package
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Should you take the COBRA Stimulus Package Subsidy?

Wednesday, March 4th, 2009

Originally Posted: February 23rd, 2009

BACKGROUND

President Obama signed legislation allowing those who are COBRA/State Continuation eligible starting from 9/1/2008 to 12/31/2009 to receive a 65% subsidy by their former employers. See my former posts for more details on this plan.

Essentially, you pay 35% of your COBRA costs. This means if you have a family and COBRA costs $1200/month for a family, you would pay $420/month instead. This is a great deal, right?

STAYING ON COBRA IS THE BEST THING, RIGHT?

The main problem is that the subsidy goes on for a maximum of 9 months or until your COBRA/State Continuation is exhausted. A lot can happen during that time. If you feel reasonably certain that, given your field, your expertise, and the market in your area, you will be re-employed within that time frame, then it makes sense.

It also makes sense if you have a health condition that would not be covered by a private (individual/family) policy.

WHAT ABOUT THE REST OF US?

If you have a major “health event” this could leave you uninsurable on the individual/family health insurance marketplace. This means that once your continuation is over, you would move either on the state health insurance plan (if your state has one, check here to see: http://www.naschip.org/states_pools.htm). If your state doesn’t have this, they would have an “insurer of last resort” that you could move onto. Some states such as New Jersey offer guaranteed issue health insurance, but it is extremely expensive.

If you are thinking of starting your own business, a private plan makes sense. Then you don’t have to worry about health insurance. As long as you pay your premiums, you have the insurance.

Some small businesses no longer offer health insurance. If this is the case, you’ll need to purchase your own policy anyway.

Having your own policy would allow you to negotiate with your future employer. Some companies would rather pay you a subsidy rather than have you on their insurance plan because the subsidy would be less money than placing you on their health insurance plan. This gives you more money in your pocket, but more importantly, does not tie you to the company. If the job doesn’t work out, you can leave without worrying about your health insurance.

INDIVDUAL/FAMILY PRIVATE HEALTH INSURANCE

In most states, private health insurance is 30%-50% cheaper than staying on COBRA. Why? Because you are medically underwritten (this means that the insurance company has you fill out a medical questionnaire). The insurance company can then decide whether they will give you coverage as quoted, raise your premium due to risk factors, exclude certain medical conditions, or deny you coverage.

If you are reasonably healthy, chances are you’ll get the coverage you need at the rate your agent quoted you. Agents (at least the good ones), do field underwriting of people’s medical conditions to determine, before you apply, whether the insurance company will take you.

Finally, you can choose the level of coverage you want. From choosing a plan most closely matching your employer’s health insurance to a $10,000 deductible HSA compatible plan (these run around $296/mo for a family of 4 in Illinois).

RECOMMENDATION

Take a look at private health insurance and their rates. If the rates are around your cost on the stimulus package, then consider switching to private insurance (see my “Tips for Evaluating Individual/Family Health Insurance” at http://www.robertslayton.com/Articles.htm).

If you are considering going into your own business or working for a small employer that doesn’t offer health insurance, then a private policy also make sense.

If you have major medical issues (e.g. diabetes, cancer w/in the last 3 years, heart attack/stroke within the last 5 years), then staying on COBRA makes sense. Don’t forget, you don’t have to keep everyone on the policy if you don’t need to. Just the person with the medical issue needs to stay. The other family members can be written off on a private plan if the overall savings is less or makes sense (per my reasoning above).

As always, I welcome any comments you might have.

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Tags: American Recovery and Reinvestment Act, COBRA, Employee Benefits, Health Insurance
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How Employers are impacted by the State Continuation/COBRA section of the American Recovery and Reinvestment Act

Friday, February 20th, 2009

With the passing of the American Recovery and Reinvestment Act, there is a provision about COBRA and State Continuation that directly impacts your business. This email is to help you sort out your requirements. My recommendation is to speak with your CPA and/or Attorney for more clarification.

The Act takes effect on 3/1/2009. Here’s what it means for you.

SEPARATED EMPLOYEES

1. If you laid off an employee between 9/1/2008 and 3/1/2009, they have the opportunity of going back on your health insurance plan and are eligible for a 65% employer paid subsidy of their health insurance coverage for up to 9 months (or until the health insurance period ends, whichever is less).

They do not have to pay back premium to “catch up” to the current date. The insurance will restart from the date agreed upon (e.g. 3/1/2009). The length of time an employee will be allowed to stay on State Continuation/COBRA is determined by the date they were first eligible. For example, a person was separated 9/15/2008 and their benefits ended 9/30/2008. State Continuation would have started on 10/1/2008, but the person elected not to take it. If they elect to take it now (let’s say 3/1/2009) because of the subsidy, they would be able to continue on State Continuation for 3 more months which equals the 9 months allotted for State Continuation in Illinois.

2. If you lay off a person between 3/1/2009 and 12/31/2009, they are eligible for that same subsidy.

3. Separated employees have the option of choosing a lower cost health insurance plan (if one is provided by the employer). The premium must be less than their current premium.

NOTE: If a person quits or did not qualify for State Continuation or COBRA, they wouldn’t be eligible for this subsidy.

HOW THE SUBSIDY IS PAID

You as the employer are required to pay 65% of the cost of their insurance for up to 9 months (consult with your CPAs for specifics). You are allowed to reduce the amount of Payroll taxes collected by the amount you paid out in subsidies. For example, you paid out $3500 in COBRA subsidies. Your Payroll Taxes due are $4000. You can reduce the amount of Payroll taxes due by $3500 and just pay $500 to the government.

If your payroll taxes are less than the amount of Subsidy you need to pay, the government will reimburse you (It is not clear how this reimbursement is supposed to work).

NOTIFICATION REQUIREMENT

For those eligible employees already separated as of 3/1/2009 and going forward, you are required to send a notice to them alerting them to this subsidy and that they have a window within which to go back on the group health insurance plan. The Federal Government is supposed to come out with model language within 30 days for Employers. Once the employee receives notice, they have up to 60 days within which to make a decision to take COBRA/State Continuation.

COBRA COMPANIES

If you already use a third party COBRA company, they should be all over this. If not and you would like to work with one, email/call me and I can recommend one to you.

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Tags: American Recovery and Reinvestment Act, COBRA, Employee Benefits, Health Insurance, Legislative, State Coninuation, subsidy
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