Stimulus Bill COBRA HighlightsCynthia Stamer
March 4, 2009 — 2,226 views
The Stimulus Bill provisions that took effect on February 17, 2009 require special COBRA treatment for "assistance eligible individuals." See "Stimulus Bill COBRA Amendments Require Immediate Group Health Plan Action" for more information.
The Stimulus Bill definition of "assistance eligible individual" generally includes any COBRA "qualified beneficiary" who meets all of the following requirements:
- Is eligible for COBRA continuation coverage at any time during the period beginning September 1, 2008 and ending December 31, 2009;
- Elects COBRA coverage (when first offered or during the additional election period): and
- Has a qualifying event for COBRA coverage that is the employee's involuntary termination during the period beginning September 1, 2008 and ending December 31, 2009.
This definitions includes both involuntarily terminated employees and their dependents who lost coverage under a group health plan due to the involuntary termination. Presently, no additional guidance exists regarding this definition.
As part of their COBRA amendments, the Stimulus Bill limits the COBRA premium that a COBRA-covered group health plan can charge an "assistance eligible individual" to 35% of the otherwise applicable COBRA premium for a period of up to 9 months (the "Subsidy Period") beginning March 1, 2009. Employers sponsoring these group health plans must pay the remaining 65% of the COBRA premium (the "COBRA Subsidy") for the assistance eligible individual during the Subsidy Period. However, the Stimulus Bill allows an employer to seek reimbursement by claiming a payroll tax credit for these COBRA Subsidy payments by complying with applicable IRS procedures.
The Stimulus Bill also requires certain assistance eligible individuals whose employment terminated between September 1, 2008 and February 16, 2009 and did not elect COBRA coverage when previously offered or who allowed COBRA coverage to lapse after electing that coverage be offered a second COBRA enrollment period in which to elect prospectively to enroll in COBRA coverage. It also requires that group health plans that offer employees different plan options allow assistance eligible individuals the option to change their coverage choice. Also Group health plan administrators must provide certain notifications to assistance eligible individuals concerning these changes.
IRS Guidance For Employers About
Claiming Premium Subsidy Payroll Tax Credit
The new IRS Stimulus Bill COBRA Relief information unveiled on the IRS.gov website includes an extensive set of questions and answers for employers. It indicates that the IRS will require employers to file a revised Form 941, Employer's Quarterly Federal Tax Return and to maintain certain supporting documentation to claim the payroll tax credit. The required supporting documentation will include:
Documentation of receipt of the employee's 35 % share of the premium; In the case of insured plans, a copy of an invoice or other supporting statement from the insurance carrier and proof of timely payment of the full premium to the insurance carrier; and Declaration of the former employee's involuntary termination.
The materials posted by the IRS on its website include a revised version of Form 941 that employers must use to claim the payroll credit beginning with the first quarter of 2009. The IRS has announced that it also will send a copy of the revised Form 941 to about 2 million employers in mid-March.
DOL Fact Sheet & Other Materials
Concurrent with the IRS posting of guidance, the Department of Labor Employee Benefits Security Administration on February 26, 2009 posted on its website a COBRA Premium Summary Fact Sheet summarizing the Stimulus Bill COBRA requirements along with a flyer for employers, a flyer for employees and two downloadable job loss posters announcing the COBRA Stimulus Bill requirements. The DOL did not post the model notice for employers to use to notify assistance eligible individuals of the Stimulus Bill rules but is required to by March 19, 2009. However, DOL officials in response to inquiries have reported it has completed an initial draft that it expects to finalize soon.
The Summary Fact Sheet contains a few clarifications in addition to its basic summary of the Stimulus Bill COBRA Subsidy provisions. These include the following:
- The COBRA Subsidy starts on March 1, 2009 for plans that charge for COBRA coverage on a calendar month basis and ends upon ending of eligibility for other group coverage (or Medicare); after the Subsidy Period; or when the maximum period of COBRA coverage ends, whichever occurs first.
- The second COBRA election period for assistance eligible individuals applies both to those who did not elect COBRA when it was first offered and those who did elect COBRA but are no longer enrolled (for example because they were unable to continue paying the premium). Both have a new election opportunity.
- The Special election period opportunity does not apply to coverage sponsored by employers with less than 20 employees that are subject to State Law.
- Plan administrators must provide notice about the COBRA Subsidy to individuals who have a COBRA qualifying event during the period from September 1, 2008 through December 31, 2009. Plan administrators may provide notices separately or along with notices they provide following a COBRA qualifying event. This notice must go to all individuals, whether they have COBRA coverage or not, who had a qualifying event from September 1, 2008 through December 31, 2009.
- Individuals eligible for the special COBRA election period also must receive a notice informing them of this opportunity. This notice must be provided within 60 days following February 17, 2009.
- Individuals who are denied treatment as assistance eligible individuals and thus are denied eligibility for the COBRA Subsidy (whether by their plan, employer or insurer) may request an expedited review of the denial by the DOL to be completed within 15 business days of receipt of a completed request for review. The DOL is currently developing a process and an official application form that will be required for appeals.
- If an employer offers additional coverage options to active employees, the employer may (but is not required to) allow assistance eligible individuals to switch the coverage options they had when they became eligible for COBRA. To retain eligibility for the COBRA Subsidy, the different coverage must have the same or a lower premium than the individual's original coverage. The different coverage can not provide only dental, vision, a health flexible spending account, or coverage for treatment that is furnished in an on-site facility maintained by the employer.
- If an individual's modified adjusted gross income for the tax year in which the premium assistance is received exceeds $145,000 (or $290,000 for joint filers), then the amount of the COBRA Subsidy received during the tax year must be repaid. For taxpayers with adjusted gross income between $125,000 and $145,000 (or $250,000 and $290,000 for joint filers), the amount of the COBRA Subsidy that must be repaid is reduced proportionately. Individuals may permanently waive the right to COBRA Subsidy but may not later obtain the COBRA Subsidy if their adjusted gross incomes end up below the limits.
The COBRA amendments in the Stimulus Bill are the latest list in a series of new laws and regulations requiring changes in health plan rules, notices, administrative forms and practices. Some of these include new requirements to grant certain military related medical leaves under the Family and Medical Leave Act ("FMLA") and recently effective final FMLA regulations; new premium subsidy and other federal laws affecting the eligibility and enrollment rights of certain individuals to be covered by qualifying State unemployment, Medicaid or the Children's Health Insurance Program (CHIP) premium subsidy programs; changes to nondiscrimination rules enacted under the Genetic Information Nondiscrimination Act of 2008; amendments to the Americans With Disabilities Act; and expanded mental health parity mandates.
Most employers and other group health plan sponsors, their insurers, fiduciaries and administrators will want to review and update their group health plan documents, summary plan descriptions, policies, forms, notices and practices to respond to these and other recent changes to federal health plan rules.
Cynthia Marcotte Stamer, is nationally and internationally recognized for her work assisting businesses, governments, and other entities to develop creative strategies for dealing with employee benefit and related human resources, insurance, health care and finance concerns. Ms. Stamer helps businesses design, administer and defend cost-effective employee benefit other human resources programs, policies and procedures to meet their budgetary and other business objectives.