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COBRA: FAQ’s and Answers for Employers
Michael Young and Paul Altavena of ConnectPay want employers to know that the Internal Revenue Service has posted information to help employers understand the new regulations regarding COBRA as required by the American Recovery and Reinvestment Act (ARRA), the stimulus package that became law on Feb. 17, 2009.
Under the new COBRA law (the Consolidated Omnibus Budget Reconciliation Act) eligible former employees, enrolled in their employer’s health plan at the time they lost their jobs are required to pay only 35 percent of the cost of COBRA coverage. Employers must submit the entire COBRA premium to the insurance carrier, but the employers are entitled to a credit for the other 65 percent of the COBRA cost on the new quarterly payroll tax return (941)
The IRS has provided new information on its web site that includes an extensive set of questions and answers for employers about claiming credit for the COBRA premiums they've paid.
ConnectPay has provided a direct link to the IRS and DOL pages in this article. Click on any phrase of interest in this article highlighted in blue to go directly to the web site referenced.
In the Questions and Answers section of the IRS web site, employers will find many of their questions about this new law, such as:
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.
Many other questions are answered as well. Following is a sample of the types of questions employers can find on the IRS web site:
Q: When does the law become effective?
Q: Will the COBRA premium subsidy be taxable income for the individual?
Q: What if the employer’s group health plan is self-insured? Do the subsidy requirements apply?
Q: How will an employer be reimbursed for the COBRA subsidy that it has provided to eligible individuals?
Q: How does an employer claim the credit for the COBRA subsidy?
The United States Department of Labor has also provided much helpful information about this topic on their web site.
Questions and FAQ’s about COBRA in general that are important to employers are answered on the COBRA Continuation Assistance Coverage web site such as the following samples:
Q: What is COBRA continuation health coverage?
Q: What does COBRA do?
Q: Who can answer other COBRA questions?
Q: Which employers are required to offer COBRA coverage?
A: Employers with 20 or more employees are usually required to offer COBRA coverage and to notify their employees of the availability of such coverage.
Questions and FAQ’s specific to the changes in the American Recovery and Reinvestment Act (ARRA) stimulus package are also found at the DOL web site.
A sample of the questions and answers found here include:
Q: My health coverage was terminated when my employer shut down and laid off all its workers. Can I get the premium reduction to pay for new health coverage?
A: The premium reduction is available to help qualified individuals pay for COBRA continuation health coverage. If there is no longer a health plan, there is often no COBRA coverage available, unless another related or successor employer sponsors a group health plan responsible for providing coverage to you.
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