President Barak Obama signed the American Recovery and Reinvestment Act of 2009 (ARRA) into law on February 17, 2009. The ARRA enacted considerable changes to multiple areas of employment and benefits law. One said change was to employee COBRA benefits.
COBRA is a health insurance plan which allows an employee who leaves a company to continue to be covered under the company's health plan, for a certain time period and under certain conditions.
Most significantly, the ARRA offers "assistance eligible individuals" (AEIs) a 65 percent subsidy of their required COBRA premiums and, for certain AEIs, an additional enrollment period within which to elect COBRA coverage.
The ARRA defines AEIs to include any person who loses group health coverage as a result of being "involuntarily terminated" between September 1, 2008, and December 31, 2009, as well as the terminated person's dependents.
Under the ARRA, an AEI pays only 35 percent of her COBRA premium that would otherwise be charged under the group health plan. The employer - or the plan, in the case of a multiemployer plan - pays the remaining 65 percent of the COBRA premium. In turn, the employer (or plan) is able to obtain a reimbursement of the 65 percent subsidy through a payroll tax credit to the employer (or plan) or, in some limited cases, to the insurer. The IRS guidance, which is in question and answer format, and the form that employers will use to claim the new tax credit can be found on the IRS website. See www.irs.gov/newsroom/article/0,,id=204708,00.html.
The ARRA also creates an additional enrollment period during which certain AEIs may elect COBRA coverage. In essence, employees who were terminated between September 1, 2008 and December 31, 2009, and who did not initially elect COBRA coverage have a new election period under the ARRA. These employees have 60 days after receiving the new COBRA notice during which they may elect COBRA coverage at the subsidized rate.
To review additional information on the changes made to COBRA or additional information regarding The American Reinvestment and Recovery Act of 2009, see the July 2009 issue of South Carolina Lawyer, "The American Reinvestment and Recovery Act of 2009 and the Resulting Effects on the Law of the Workplace" by Daniel T. Sulton and Lucas J. Asper, pages 39-43,50.
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