Peacock Tales
Volume 19, Number 3 · July 2009Changes Made to COBRA Under the American Recovery and Reinvestment Act 
The American Recovery and Reinvestment Act (ARRA) took effect on February 17, 2009. ARRA amends the Consolidated Omnibus Budget Reconciliation Act (COBRA) to place a temporary limit of 35 percent on the premium to be paid for continuation of health insurance in group plans by employees whose employment is involuntarily terminated between September 1, 2008 and December 31, 2009. Employers with 20 employees or more are responsible for the remaining 65 percent, which is later reimbursed in the form of a tax credit against their subsequent payroll tax deposits. This credit can be claimed on either quarterly or annual federal tax returns.
The employer's obligation takes effect with the first coverage period that occurs after both (1) the date of the event which qualified the employee for continuation coverage, and (2) February 17, 2009. The health insurance plan administrator may apply any prior overpayment by those who had paid 100 percent of their premiums as a credit toward subsequent premiums, so long as it can be used within 180 days of the overpayment. An employee's eligibility for this subsidy ends after nine months have elapsed from the date of involuntary termination, upon eligibility for other group coverage or Medicare, or after the maximum period of COBRA coverage has expired (generally 18 months), whichever occurs first.
The United States Department of Labor has published Model Notices on its website, www.dol.gov, which must be sent by the employer or insurance company to all qualified beneficiaries (covered employees and their dependents) who experience any COBRA qualifying event (not only involuntary termination) between September 1, 2008 and December 31, 2009.
Confusing? We thought so too, at first. Please contact Rachel Lozosky for a more detailed explanation. She can be reached at rlozosky@peacockkeller.com or (724) 222-4520.