It is not often you hear stimulus and COBRA in the same sentence but consider that a gift from the federal government. President Obama signed the American Recovery and Reinvestment Act of 2009 on February 17. It is a 600+ page new law intended to stimulate growth and jobs in light of the economic downturn. Part of the law directs the creation of Recovery.gov – a Web site that will be updated with the new requirements, including issuance of contracts needing new employees.
For employers and HR professionals specifically, Title III of the Act – Health Insurance Assistance for the Unemployed – provides offsets for COBRA coverage to employees who have been laid off between September 1, 2008 and December 31, 2009. Some of the specifics include:
1. Individuals who became eligible for COBRA between September 1, 2008 and February 17, 2009, but did not elect coverage, have 60 days to elect coverage dating back to their original eligibility date. Your health plan administrator must notify these eligible employees of this option.
2. Employers must either amend or include an additional notice with COBRA notifications to employees. The law specifies the content of this notification but requires the Department of Labor and other agencies to coordinate efforts to prepare model notifications within the next 30 days. The Chamber will track these notices and ensure our forms are updated accordingly.
3. The bill provides COBRA payment assistance for up to 65 percent of the premium for employees laid off by their employers. The payment will be offset through payroll taxes. The law outlines which entities are eligible for reimbursement by the federal government:
If an individual had paid the full COBRA premium starting September 1, 2008, employers must reimburse the individual for any premium paid in excess of 35 percent or provide a credit to the individual to reduce one or more of the individual’s premium payment. These employers will be reimbursed by the federal government.
These new requirements implicate the Internal Revenue Code, ERISA and other federal laws that are complex with detailed requirements. Be sure to consult with a specialist in this area to fully understand your obligations under this new law.