COBRA Payments To Be Subsidized

The American Recovery and Reinvestment Act of 2009 expanded eligibility for COBRA and provides a premium reduction to certain qualified individuals. Individuals eligible for COBRA coverage who were involuntarily terminated by their employer on or after September 1, 2008 through December 31, 2009, who are eligible for COBRA and elect COBRA may be eligible to pay a reduced premium amount that is only 35% of the premium costs for your COBRA coverage.

Under the new legislation, 65% of the COBRA cost may be subsidized as long as the employee does not earn more than $125,000 as an individual or $250,000 as a married couple filing jointly in the year the subsidy is received.

Employees would be affected in three ways. First, employers (or health plans administering COBRA) will be required to provide notice of the subsidy provision. The US Department of Labor will be issuing model language within thirty days. Second, employers will pay the subsidy and be reimbursed through a credit against payroll taxes. Third, employees who have lost their jobs since September 1, 2008, will be given an additional 60 days to sign up for COBRA.

These provisions relate only to premiums for coverage periods beginning after the new law was enacted on February 17, 2009. The law does not allow reimbursement of premiums for coverage periods beginning before February 17, 2009. Qualified individuals can, however, receive the premium subsidy going forward, for up to nine months.

For additional information or specific questions about your situation and how these new rules apply to you, you can call the Department of Labor at 1.866.444.3272, and speak with a Benefits Advisor. You can also check the Employee Benefits Security Administration's dedicated web page at www.dol.gov/COBRA