American Recovery And Reinvestment Act Of 2009 - Important COBRA Benefit And Administration Amendments

Author(s): Dwayne McKenzie, Charles E. Noneman

Source: CCN Client Alert

2/26/2009

On February 17, 2009, President Obama signed the American Recovery and Reinvestment Act of 2009 (the "ARRA") into law. The ARRA contains significant provisions affecting COBRA benefits and administration requiring immediate attention of employers and human resource personnel. In particular:

  • Employees who are subject to involuntary termination from September 1, 2008, through December 31, 2009, and who become eligible for COBRA benefits will be entitled to a 65% subsidy of their COBRA premium payments. The subsidy will be paid by the employer who will then be entitled to take it as a refundable credit towards payroll taxes.
  • Employers are subject to additional notice and administration requirements, including notice to employees who suffered an involuntary loss of coverage and to certain qualified beneficiaries.
  • Employers will have additional reporting requirements to be entitled to the tax credit.
  • The ARRA provides a transition period for employers to comply. During this time, employers should inform employees and qualified beneficiaries with questions that the employer is aware of the ARRA requirements and will comply after the transition period ends.
  • The DOL and IRS are expected to provide additional guidance within the next several weeks.

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