Employers Rx LLC
The American Recovery and Reinvestment Act of 2009 has added to the already complex and overwhelming administrative burden that employers are responsible to comply with. COBRA regulations are just another example of the patchwork of regulations designed to plug the holes in our corporate for-profit health insurance system. Notice! I did not say "healthcare" system.
A "Healthcare" system addresses the actual delivery of health care services. Insurance companies have nothing to do with providing services, they are simply put .... a funding mechanism. These companies, indeed institutions, have developed and implemented a convoluted system for transferring payments from "consumers" to service providers while wasting billions of dollars on claims administration, legal, lobbying, marketing, sales and underwriting expenses. This doesn't account for billions more in executive salaries and stock options, and billions more expended by doctors, labs, hospitals, and pharmacies in order to navigate their systems.
Until then, read the latest from the Department of Labor and the Internal Revenue Service.
Employers cannot claim the new COBRA premium assistance credit until they receive the 35% payment from the former employee, Treasury Department and IRS officials said on April 6. Additionally, being called up to military duty may be an involuntary termination triggering eligibility for the credit, they clarified. The Treasury and IRS officials spoke during a webcast about COBRA premium assistance sponsored by the Department of Labor (DOL).
Premium reduction. Individuals who are involuntarily separated from employment between September 1, 2008, and December 31, 2009, may be eligible for temporary COBRA premium assistance. The American Recovery and Reinvestment Act of 2009 (P.L. 111-5) (2009 Recovery Act) allows dislocated workers to pay 35% of their COBRA continuation premium and be treated as paying the full premium. Employers will pay the remaining 65%.
The 2009 Recovery Act also provides a limited second-chance window to elect COBRA coverage. The subsidy is generally available for nine months.
The IRS and the DOL have posted frequently asked questions (FAQs) and other information about the COBRA subsidy on their websites The IRS issued formal guidance on April 1, 2009. "We focused on issues we could reach quick consensus on," Russell Weinheimer, senior counsel, IRS Office of Chief Counsel, said.
Payroll tax credit. Employers will be reimbursed for their 65% COBRA premium assistance through a payroll tax credit, Patricia McDermott, special counsel, IRS Office of Chief Counsel, explained. However, the credit cannot be claimed until the employer receives the 35% payment from the covered individual, she cautioned.
In some cases, entities other than employers will claim the credit, McDermott explained. If the COBRA coverage is provided by a multiemployer plan, for example, the plan provides the subsidy and is reimbursed by taking a credit on Form 941.
Rather than claiming the credit, an employer may offset payroll tax deposits during the quarter by the amount of the premium, McDermott said. Additionally, the employer can elect to have any excess credit applied to next quarter liabilities, rather than accepting a refund from the IRS.
Military service. In March, Treasury Department and IRS officials indicated that being called to military duty is not an involuntary termination for the COBRA subsidy. Now, the government has revisited that position, Kevin Knopf, attorney-advisor, Treasury Office of Tax Policy, said. "We are going to consider (call up to military service) involuntary termination of employment."
Premiums. Generally, plans can charge 102% of the total cost of coverage. The employee's 35% share is calculated against the 102% amount, Weinheimer explained. "If the employer charges less (for COBRA continuation coverage) than the maximum amount allowed by law, the 35% reduction applies to that lower amount."
Notices. The 2009 Recovery Act requires employers to send a general notice to all qualified beneficiaries, whether they are currently enrolled in COBRA coverage or not, who have a qualifying event between September 1, 2008, and December 31, 2009. The general notice goes to qualified beneficiaries and not just covered employees, Amy Turner, senior advisor, Department of Labor, explained. A qualified beneficiary may be an individual whose qualifying event was divorce or aging out of dependent coverage.
A notice of the special second-chance COBRA election must be provided to any covered employee who did not elect COBRA coverage between September 1, 2008, and February 16, 2009. Individuals who elected but later discontinued COBRA coverage also must receive the second-chance notice. The notice of extended election must be provided by April 18, 2009. The DOL has posted model notices on its website.
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