What are the COBRA Credits and How Do They Affect My Small Business?
Question: What are the COBRA Credits and How Do They Affect My Small Business?
Answer:
The American Recovery and Reinvestment Act of 2009 (better known as the "Stimulus Package" or the Recovery Act) contains several provisions that will affect your business if you have laid off, or plan to lay off workers. These Recovery Act provisions relate to COBRA benefits.
What is COBRA?
Since 1986, employers with over 20 employees who have health plans must provide continued health coverage eligibility, called COBRA coverage, to employees who have left the company as a result of a "qualifying event." The former employee pays the full cost of the coverage at the rate the employer paid.
What are the New COBRA Benefits?
To help individuals laid off during recent months, the federal government is providing a 65% premium subsidy for up to 9 months to eligible individuals and their dependents. Eligible individuals are those "involuntarily terminated" (laid off) between September 1, 2008 and December 31, 2009, and who earn less than $125,000 (if filing taxes as a single person) or $250,000 (if filing taxes jointly). If someone was laid off after September 1 and this person originally declined coverage, they may re-enroll in COBRA coverage and possibly receive the subsidy. Former employees must enroll within 60 days of termination.
What are My Responsibilities as an Employer?
You must:
You must also reduce the amount you charge former employees to account for this subsidy. You may take a reduction on your employment tax deposit for this amount.
Answer:
The American Recovery and Reinvestment Act of 2009 (better known as the "Stimulus Package" or the Recovery Act) contains several provisions that will affect your business if you have laid off, or plan to lay off workers. These Recovery Act provisions relate to COBRA benefits.
What is COBRA?
Since 1986, employers with over 20 employees who have health plans must provide continued health coverage eligibility, called COBRA coverage, to employees who have left the company as a result of a "qualifying event." The former employee pays the full cost of the coverage at the rate the employer paid.
What are the New COBRA Benefits?
To help individuals laid off during recent months, the federal government is providing a 65% premium subsidy for up to 9 months to eligible individuals and their dependents. Eligible individuals are those "involuntarily terminated" (laid off) between September 1, 2008 and December 31, 2009, and who earn less than $125,000 (if filing taxes as a single person) or $250,000 (if filing taxes jointly). If someone was laid off after September 1 and this person originally declined coverage, they may re-enroll in COBRA coverage and possibly receive the subsidy. Former employees must enroll within 60 days of termination.
What are My Responsibilities as an Employer?
You must:
- Notify former employees who were laid off after September 1, 2008 of their right to enroll in COBRA coverage and of their possible eligibility to receive the premium subsidy.
- Notify any employees laid off between now and the end of 2009 of the premium subsidy and their possible eligibility for this subsidy.
You must also reduce the amount you charge former employees to account for this subsidy. You may take a reduction on your employment tax deposit for this amount.