COBRA provision in stimulus package

CLumm · February 2009

Anyone know enough about this provision to offer an opinion or direct me to a resource on the following?

1. We are a project-based nonprofit, and in our business staff leave if they run out of funding. Either the project ends, or their role on a project ends, and if they are not picked up by another project their employment is terminated. Sounds like a layoff to me, is it for the purposes of the new provision?

2. What about people who remain employed at our company but reduce their time, due to lack of work, below the threshold for eligibility for the health plan? Below 50% of full time, they have to elect COBRA if they want to remain on our plans. Are they considered laid off for the purposes of the new provision?

Thanks.

regdunlop · February 2009

the legislation itself has a definition of an eligible person:

"Assistance eligible individual.--For purposes of this
section, the term ``assistance eligible individual'' means
any qualified beneficiary if--
(A) at any time during the period that begins with
September 1, 2008, and ends with December 31, 2009, such
qualified beneficiary is eligible for COBRA continuation
coverage,
(B) such qualified beneficiary elects such coverage, and
(C) the qualifying event with respect to the COBRA
continuation coverage consists of the involuntary termination
of the covered employee's employment and occurred during such period."

go to http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=2009_record&docid=cr12fe09-147 and search for "premium assistance"

1472402 · February 2009

Has anyone come to grips with what we need to do, if anything, before the Feds come up with a "model notice"? What do the people that are eligible for the assistance do about payment of COBRA premiums in the beginning of March? Do they pay the 35% or 100%? Since the mechanisms for the assistance program are not yet in place, there doesn't appear to be much we can do, but I feel like I should be doing something.

1472402 · February 2009

I guess that given the lack of response to my post last week that I'm not the only one who's in a quandary regarding what to do. Since last September we have had to lay off 12 people as a direct result of the current economic conditions. Rather than doing nothing, I sent each one a letter the end of last week advising them that they will be eligible for the assistance, but that due to the lack of information from the Feds, they'll basically have to sit tight until we get further direction.

regdunlop · February 2009

i apologize for the delayed response. in the legislation there is information on what needs to be included in the notice so that may help you. i copied it below. most employers will have to offer the "premium assistance" to laid off workers beginning march 1 (the first coverage period after the bill became law). this means that if the laid off worker pays 35 percent of the premium for COBRA continuation coverage the health plan must consider the person fully paid (during the 9 month premium assistance period).

.--In the case of notices provided under
     section 606(a)(4) of the Employee Retirement Income Security
     Act of 1974 (29 U.S.C. 1166(4)), section 4980B(f)(6)(D) of
     the Internal Revenue Code of 1986, section 2206(4) of the
     Public Health Service Act (42 U.S.C. 300bb-6(4)), or section
     8905a(f)(2)(A) of title 5, United States Code, with respect
     to individuals who, during the period described in paragraph
     (3)(A), become entitled to elect COBRA continuation coverage,
     the requirements of such sections shall not be treated as met
     unless such notices include an additional notification to the
     recipient of--

       (I) the availability of premium reduction with respect to
     such coverage under this subsection, and
       (II) the option to enroll in different coverage if the
     employer permits assistance eligible individuals to elect
     enrollment in different coverage (as described in paragraph
     (1)(B)).

       (ii) Alternative notice.--In the case of COBRA continuation
     coverage to which the notice provision under such sections
     does not apply, the Secretary of Labor, in consultation with
     the Secretary of the Treasury and the Secretary of Health and
     Human Services, shall, in consultation with administrators of
     the group health plans (or other entities) that provide or
     administer the COBRA continuation coverage involved, provide
     rules requiring the provision of such notice.
       (iii) Form.--The requirement of the additional notification
     under this subparagraph may be met by amendment of existing
     notice forms or by inclusion of a separate document with the
     notice otherwise required.
       (B) Specific requirements.--Each additional notification
     under subparagraph (A) shall include--
       (i) the forms necessary for establishing eligibility for
     premium reduction under this subsection,
       (ii) the name, address, and telephone number necessary to
     contact the plan administrator and any other person
     maintaining relevant information in connection with such
     premium reduction,
       (iii) a description of the extended election period
     provided for in paragraph (4)(A),
       (iv) a description of the obligation of the qualified
     beneficiary under paragraph (2)(C) to notify the plan
     providing continuation coverage of eligibility for subsequent
     coverage under another group health plan or eligibility for
     benefits under title XVIII of the Social Security Act and the
     penalty provided under section 6720C of the Internal Revenue
     Code of 1986 for failure to so notify the plan,
       (v) a description, displayed in a prominent manner, of the
     qualified beneficiary's right to a reduced premium and any
     conditions on entitlement to the reduced premium, and
       (vi) a description of the option of the qualified
     beneficiary to enroll in different coverage if the employer
     permits such beneficiary to elect to enroll in such different
     coverage under paragraph (1)(B).
       (C) Notice in connection with extended election periods.--
     In the case of any assistance eligible individual (or any
     individual described in paragraph (4)(A)) who became entitled
     to elect COBRA continuation coverage before the date of the
     enactment of this Act, the administrator of the group health
     plan (or other entity) involved shall provide (within 60 days
     after the date of enactment of this Act) for the additional
     notification required to be provided under subparagraph (A)
     and failure to provide such notice shall be treated as a
     failure to meet the notice requirements under the applicable
     COBRA continuation provision.

1472402 · February 2009

Not a problem with the response. I was aware of the provisions in the law, having read and re-read that section of the law, my concerns were regarding the specifics of the notice, such as what are the "forms necessary for establishing eligibility for premium reduction"? Are they established by the Feds? Each employer? What are they to contain? I have not yet contacted the company that administers our payroll, but I can't imagine that there isn't / won't be a fair amount of documentation needed regarding the payroll tax offset that we will get for the 65% portion of the payments for premiums. Of course there are likely many things that I haven't thought of - it's the skeletons in the closet that keep me awake at night.

IT HR · February 2009

It is my understanding that the Department of Labor is looking at this to try to determine what they need to help employers with. I have contacted both my payroll provider as well as my benefits broker. Both are frantically looking over things to determine what needs to be done. I did see somewhere that there will need to be reporting done to the IRS for who you have helped and what tax credits you will be taking in future quarters. There is also some provisions that if people make over a certain threshold that they are not eligible for this assistance.

This website - HR.BLR.com has done some disecting of the law to help understand it a little bit more, but I still think we as employers have more questions than answers.

1472402 · February 2009

[quote user="IT HR"]

It is my understanding that the Department of Labor is looking at this to try to determine what they need to help employers with. I have contacted both my payroll provider as well as my benefits broker. Both are frantically looking over things to determine what needs to be done. I did see somewhere that there will need to be reporting done to the IRS for who you have helped and what tax credits you will be taking in future quarters. There is also some provisions that if people make over a certain threshold that they are not eligible for this assistance.

This website - HR.BLR.com has done some disecting of the law to help understand it a little bit more, but I still think we as employers have more questions than answers.

[/quote]

I'm finding the same things as you are. I'm going to have a discussion with both our payroll provider and benefits administrator, hopefully today, and maybe they can shed some light on the subject. In the meantime, it appears as if come hell or high water, on March 1 we'll have to shell out the 65% share of the COBRA assistance and then wait until we have the proper paperwork to claim the payroll tax deduction.

SFbay · February 2009

The drafters of the law must have realized that some premium assistance
eligible individuals will pay the full premiums as
payroll/providers/benefit administrators/employers get ramped up to
handle the new COBRA subsidy. They provided instructions in the law
for what happens in the March and April if eligible laid-off
individuals pay full premiums. The law states that the entity
to which the full premium payment was made must do one of two things:
reimburse the person for the 65 percent of the premium that is covered
under the subsidy program or provide a credit to reduce future premium
payments. See page 9 and 10 of the law http://www.dol.gov/ebsa/pdf/COBRAPremiumReductionProvision.pdf
. A reimbursement payment must be made within 60 days of the full
payment by the individual, unless "it is reasonable to believe that a
credit for the excess payment will be used by the assistance eligible
individual within 180 days of the date on which the person receives
from the individual the payment of the full premium amount." "If, as of
any day within the l80-day period, it is no longer reasonable to
believe that the credit will be used during that period, payment equal
to the remainder of the credit outstanding shall be made to the
individual within 60 days of such day."

6274086 · March 2009

The further I research this I notice more items to watch for. The last article I read is stating to make sure that before you take the credit on the 941, make sure you have actually collected the 35%. Employers are going to have to track carefully and make sure they only take the 65% credit once the employee has paid there share for those months in that quarter.

IT HR · March 2009

There is a lot of things related to this provision that are still up in the air and questions still to be answered. We are waiting to see exactly how the sample letters are worded from the DOL. I have participated in conference calls with my benefits broker, from a large national law firm, and a couple others. Each time I participate in one of these, someone else brings up a situation that we are just not sure how to handle because there are different interpretations of the law.

HRPOB · March 2009

We only have one former employee who qualified for the sibsidy. And wouldn't you know it .... she wants to take us up on it. Neither our insurance provider or employment law attorney can tell exactly what I need to do ongoing. I guess I'll wing it until someone tells me differently. [:#]

COBRA provision in stimulus package

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