“COBRA” (Consolidated Omnibus Budget Reconciliation Act) coverage remains a benefit to many employees who terminate employment, allowing them to continue receiving employer health care coverage until they either find another job or secure private medical insurance coverage.
Under the American Recovery and Reinvestment Act of 2009, a new employer-provided COBRA subsidy was created to assist individuals who lose their jobs involuntarily during the current economic recession. The subsidy was originally scheduled to expire at the end of last year, but the 2010 Department of Defense Appropriations Act, enacted on December 19, 2009, extended the subsidy’s eligibility period and the maximum duration of COBRA premium assistance.
As a result, individuals who lose their jobs during January and February may qualify for a 65-percent subsidy on their COBRA health insurance premiums, and these newly-eligible individuals, along with those already receiving the subsidy, can now receive it for up to 15 months.
Employers must provide COBRA coverage to assistance-eligible individuals involuntary terminated from employment between September 1, 2008 and February 28, 2010 who pay 35 percent of their COBRA premiums. The remaining 65 percent will be reimbursed through an employer tax credit. Previous government advisories did not take into account the December extension, stating that the COBRA termination-eligible period ended on December 31, 2009.
Note that the DOL guidance provides that the special COBRA coverage period begins for individuals involuntarily terminated on or after February 17, 2009 and lasts for up to 15 months. For example, an individual involuntarily laid off on February 18, 2009 with COBRA continuation coverage may have a premium reduction period lasting until May 18, 2010. In another scenario, an individual terminated on February 27, 2010 may have a premium reduction period lasting until May 27, 2011.
Please consider this DOL announcement and clarification before basing professional decisions regarding eligible COBRA premium assistance, as this may have implications for employer tax returns for both 2010 and 2011.
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