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Who Is Eligibile for the COBRA Subsidy: More Information to be Prepared

 

 

To qualify for this premium subsidy, an employee must be involuntarily terminated between September 1, 2008 and December 31, 2009. The subsidy will not apply to employees who voluntarily resign, or employees who lose their health coverage due to a reduction in work hours. Although the Act applies to employees who may have been terminated as of September 1, 2008, the subsidy is not retroactive. It will apply only to periods of coverage beginning on February 17, 2009 or more than likely on March 1, 2009 due to the insurance monthly billing cycle. Individuals meeting the following criteria will be considered "assistant eligible individuals":

* The individual must be a former employee, spouse (as defined by federal law) or dependent child (as defined by federal law).* He or she must have experienced an "involuntary termination" between September 1, 2008 and December 31, 2009. In which was not deemed a termination based upon "gross misconduct".* The individual may not be enrolled or eligible to enroll in another group health plan, Medicare, or other benefits eligible under title XV111 of the Social Security Act.* The electing individual must have an annual adjusted gross income below $125,000 ($250,00 for joint return filers) to receive full government subsidies. For individuals that have an annual adjusted gross income between $125,000 to $145,000 ($250.000 to $290,000 for joint return filers) their subsidy will be eligible for a portion of subsidies. Individuals earning more than $145,000 ($290,000 for joint return filers) are not eligible for the subsidies.

The subsidy applies to all COBRA-eligible group health plans for medical, dental, vision and prescription drug plans but does not include health flexible spending accounts offered under a cafeteria plan.

Qualified beneficiaries that experience an involuntary termination of employment between September 1, 2008, and February 17, 2009 and did not elect COBRA coverage during their initial 60-day election period must be provided with another notice and opportunity to elect COBRA during a second 60 day election period. This second notice also applies to individuals who elected COBRA coverage but lost coverage prior to enactment (example: date due to non-payment of premiums). Employer's have 60 days from the enactment date of February 17 to provide a revised notice to those COBRA-qualified beneficiaries

The law requires Plan Administrators to notify ALL individuals who experienced a qualifying event since September 1, 2008 a notice explaining their ARRA rights. Eligible dependents must also be notified of their rights under the law.

Government Subsidies Effective Date

This subsidy will be available to each eligible individual for up to nine months, beginning on the later of March 1, 2009, or the date the individual loses regular coverage under the plan. However, the maximum COBRA eligibility period is measured from the original qualifying date (date of involuntary termination).

Example:

* John is involuntarily terminated on September 1, 2008, and loses his employee coverage as of September 30, 2008* John is mailed COBRA election notice but fails to elect by the November 29, 2008 deadline* Within 60 days of the enactment date, John must be offered another opportunity to elect COBRA* John elects COBRA on March 15, 2009* John's COBRA coverage will begin on March 1, 2009 (The AEI can receive up to 9 months of subsidized premiums, or until the end of November, 2009.)* John's maximum COBRA eligibility period will still begin on October 1, 2008 (the day after his last date of active employee coverage) and run through March 31, 2010. John's COBRA premium will be the full COBRA premium starting December, 2009 and running through March, 2009 since the nine months subsidy will have expired.

Right to Waive Subsidy

Because any portion of a subsidy an individual receives but is not eligible for must be reported on the individual's income tax return, employers and insurers may treat all AEIs as eligible for the subsidy regardless of their income level. However these individuals have the right to waive the subsidy and pay the full premium required in order to avoid tax consequences.

What if Employer pays an additional subsidy due to a severance agreement?

Example:

* Susan's total COBRA premium is $500 per month* Due to a severance agreement, Susan's former employer subsidizes 50 percent of the premium, and Employee pays the remaining $250.* Under the Act, Susan is an AEI, so employee is eligible for the additional COBRA subsidy.* Susan is now responsible for 35 percent of the $250 premium ($87.50) and Susan's former employer can receive federal reimbursement of 65 percent of $250 ($162.50)

Once the government releases the model notification, our administration system will include necessary changes to administer the American Recovery and Reinvestment Act of 2009. Updated software changes due to the American Recovery and Reinvestment Act of 2009 (ARRA) include the following:

Issues that employers will want to think about prior to the release:

* Determine whether you wish to allow government assisted participants to switch to alternative health coverage (Optional). We recommend that you do not.

* Coordinate with payroll to revise systems and other procedures for obtaining reimbursement of these amounts from the federal government

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