Tracking COBRA Stimulus Payments and Tax Credits

Obama’s cushion for COBRA will soon hit full swing. As part of the American Recovery and Reinvestment Act of 2009 (ARRA), anyone laid off or involuntarily terminated 9/1/08 – 12/31/09 gets a 65% reduction of their COBRA premums. The law was signed 2/17/09, and effective date is 3/1/09. This is the fastest I have ever seen a new benefits law be enacted, and I have been in the benefits business over 18 years!

Any day now, notices will start flying from employers, COBRA administrators and insurance carriers, notifying people of the COBRA tax subsidy. As long as one was INVOLUNTARILY terminated during 9/1/09 – 12/31/09, he or she may receive a 65% subsidy on COBRA premiums for up to 9 months. This subsidy applies to all eligible family members, even if the employer was not making a contribution to their costs while working.

This would not apply to employees who are eligible for Medicare, Medi-Cal, a spouse’s employer plan or any other group plan. Also, if they earn more than $145,000 ($290,000 for joint filers), or quit voluntarily, they would not be eligible for the subsidy.

NEXT STEPS: Who is administering this? Businesses are. Our clients, who are small and mid-sized businesses, rely on us to work with them to identify the affected individuals, discuss the notification process, and identify the procedures for tracking subsidy payments and tax credits. Last night, I read all the new DOL notices, and created a spreadsheet to track the subsidy payments and the offsetting tax credits.

For companies too small for federal COBRA, and are subject to state continuation Cal-COBRA, the insurance carriers will be making those subsidy payments, rather than the employers. There still may be some identification and/or notification responsbilities, which is yet to be seen.

If you need more information about how this all works, go to the DOL website at or let us know if we can be of assistance. Call us at (877) 872-2080 or email HQ@MooreBenefitsInc.com.

- Model notices (available at http://www.dol.gov/ebsa/COBRAmodelnotice.html )

- FAQs for Employers on the COBRA Premium Reduction (available at http://www.dol.gov/ebsa/faqs/faq-cobra-premiumreductionER.html )

- Expanded FAQs for Employees on the COBRA Premium Reduction (available at http://www.dol.gov/ebsa/faqs/faq-cobra-premiumreductionEE.html )

- Updated FAQs for Employees on General COBRA Provisions (available at http://www.dol.gov/ebsa/faqs/faq_consumer_cobra.html )