COBRA Subsidy Extended Again!

The American Recovery and Reinvestment Act of 2009 (ARRA) provided a temporary subsidy for the cost of COBRA continuation health coverage. The COBRA premium subsidy has already been extended twice, first in December 2009 and then in March 2010. On April 15, 2010, President Obama signed The Continuing Extension Act of 2010, extending the eligibility period for the subsidy again.

Eligibility Period – Extended Through May 31, 2010

Before the most recent extension, an employee had to be involuntarily terminated from employment between September 1, 2008 and March 31, 2010 to be eligible for the COBRA premium subsidy. This eligibility period has been extended so that individuals experiencing an involuntary termination of employment through May 31, 2010 are now eligible for the 65 percent subsidy of COBRA benefits.

Although the extension was not passed until April 15, 2010, it is effective as if it were part of the original law. This means that individuals who were involuntarily terminated between April 1 and April 15, 2010 are eligible for the extension.

Extension of Subsidy Eligibility for Reduction in Hours Followed by Involuntary Termination

In general, to qualify for the COBRA premium subsidy, individuals must experience a COBRA qualifying event that is the involuntary termination of a covered employee’s employment, during the period beginning September 1, 2008 and ending May 31, 2010. As extended by the Continuing Extension Act, an involuntary termination of employment that occurs on or after March 2, 2010, and follows a qualifying event that was a reduction in hours that occurred from September 1, 2008 through May 31, 2010, is also a qualifying event for purposes of the premium subsidy.

If an individual did not elect COBRA after the reduction in hours of employment (or elected and later discontinued it), he or she will have another opportunity to elect based on the involuntary termination of employment if it occurred on or after March 2, 2010. However, the length of the COBRA coverage period will be determined as though the qualifying event were the reduction of hours of employment.

Notice Requirements

The notice requirements related to the COBRA premium subsidy continue to apply. Updated model notices will be available from the Department of Labor. If any individuals declined COBRA coverage due to the lapse of the premium subsidy between April 1, 2010 and April 15, 2010, they must be provided a new notice regarding the extension and be allowed to enroll.

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Obama Signs Another ARRA COBRA Subsidy Extension

President Obama has signed the Temporary Extension Act of 2010 (H.R. 4691), approving a stopgap, 31-day extension of federal subsidies of COBRA health care premiums as allowed under The American Recovery and Reinvestment Act of 2009 (ARRA). This act was previously amended by the Department of Defense Appropriations Act of 2010, and allowed workers who were involuntarily terminated between September 1, 2008 and February 28, 2010 to be eligible for 65 percent COBRA subsidies. Workers who were involuntarily terminated after February 28 wouldn’t have been eligible for the COBRA subsidy unless Congress passed another extension.

 Under H.R. 4691, the 65%, 15-month premium subsidy for involuntarily terminated workers is extended from March 1, 2010 through March 31, 2010. Without this extension, employees terminated involuntarily after February 28, 2010 would not have been eligible for the subsidy.

This measure will also allow employees to be eligible for the COBRA subsidy if a reduction in hours is followed by an involuntary termination of employment occurring after the enactment of this legislation.

The Senate is scheduled to begin debate this week on a measure that would extend the COBRA ARRA subsidy through December 31, 2010.

I will inform you as soon as model notices are posted on these updates.

Posted in COBRA. 1 Comment »

ARRA COBRA Subsidy Likely to be Extended … Again

Despite signs of a slowly improving job market, the economy remains gloomy enough for lawmakers to consider the quick passage of another ARRA premium subsidy extension. A proposed jobs bill in the Senate calls for extending the COBRA subsidy eligibility period to May 31, 2010. 

I will keep you abreast of any changes over the next few weeks.

Posted in COBRA. 2 Comments »

New Excise Tax Reporting Effective January 1, 2010 for Violations of COBRA, HIPAA and Other Health Plan Mandates

Effective January 1, 2010, employers who sponsor group health plans now will be required to report and pay excise taxes for failing to satisfy certain federal group health plan mandates, unless timely corrected. The Internal Revenue Service (IRS) issued final regulations regarding new reporting requirements. Starting in 2010, employers (and certain third parties) must self-report and pay excise taxes for failing to comply with the following:

  1. COBRA
  2. HIPAA portability, access, renewability and nondiscrimination rules
  3. The Genetic Information Nondiscrimination Act (GINA)
  4. Mental health parity rules
  5. Minimum hospital stays under the Newborns’ and Mothers’ Health Protection Act
  6. Continued group health plan coverage of postsecondary dependent children on a medically necessary leave of absence under Michelle’s Law
  7. Health savings account (HSA) comparable employer contributions rules, see IRS Regs
  8. Archer medical savings account (MSA) comparable employer contributions rules, see IRS Regs

Affected parties must report the excise taxes on Form 8928, “Return of Certain Excise Taxes under Chapter 43 of the Internal Revenue Code.” Failure to file Form 8928 and pay excise taxes may lead to the imposition of penalties and interest. Form 8928 is available on the IRS Web site.

Employer Practice Points

Dipa N. Sudra of Davis Wright and Tremaine, LLP suggests;

Employers should have procedures in place to identify potential excise tax issues; and relevant employees, such as human resources personnel, should be familiar with the excise taxes noted above. Employers should consider creating checklists of potential excise tax violations and periodically review the checklists.

For example, employers should work with their advisors or COBRA administrators to ensure that there are no COBRA violations.

Employers must also ensure that relevant employees are familiar with recent changes, such as:

  • The two new events under HIPAA permitting special enrollment in a group health plan for loss of eligibility for coverage, or entitlement to a state premium assistance subsidy, under Medicaid or a state child health plan. (Employers should watch out for model notices expected to be issued in 2010 regarding these new events, and should update the notice of special enrollment rights given to employees.)
  • Prohibitions under GINA against using genetic information for underwriting or certain other purposes. In particular, note that there may be violations of GINA if genetic information was obtained before, but used after, its effective date (such as information collected as part of a health risk assessment).
  • Parity requirements for medical benefits and mental health or substance use disorder benefits.
  • Michelle’s Law.

COBRA Subsidy Extension Approved

The U.S. House of Representatives overwhelmingly approved legislation Wednesday that would extend the federal subsidy of COBRA health insurance premiums for employees who are involuntarily terminated.

Embedded in H.R. 3326, a measure appropriating funds for the Department of Defense, the nine-month, 65% premium subsidy would be extended by six months to a total of 15 months. It would apply to those who lose their jobs through Feb. 28, 2010. Under current law, employees who lose their jobs after Dec. 31 are ineligible for the subsidy.

The measure, approved on 395-34 vote, also would provide an additional six months of subsidized coverage for beneficiaries whose nine-month COBRA premium subsidy has run out.

In addition, the legislation would give beneficiaries whose subsidy ran out and who didn’t pay the full premium a second chance to opt for coverage. For example, a beneficiary whose nine months of subsidized coverage ran out Nov. 30 and who didn’t pay the regular unsubsidized December premium could pay the 35% premium share in January and receive coverage for December.

The legislation would require employers to notify current COBRA beneficiaries and future beneficiaries of the new 15-month premium subsidy.

The House also is expected to take up another appropriations bill, H.R. 2847, with a provision that would extend the premium subsidy to those who lose their jobs through June 30, 2010.

The Department of Defense bill, Washington observers say, is on “fast-track” consideration and could be quickly approved by the Senate.  

Related Cobra Resources 

Department of Labor 

COBRA CONTINUATION COVERAGE ASSISTANCE UNDER ARRA

FAQ On COBRA PREMIUM  REDUCTION EXTENSION PROVISIONS

 http://www.irs.gov/businesses/small/article/0,,id=212421,00.html

COBRA Extensions Possible Twist?

The legislation to extend and enhance the COBRA subsidy that was introduced two weeks ago in the House and last week in the Senate has a possible twist that cost employers more money.  The proposed legislation – S.2730 in the Senate and HR. 3930 in the House – would continue COBRA healthcare coverage for another six months for those who have been laid off and their families.

The twist is that the subsidy would increase from 65% to 75% what’s unclear is whether the increase would apply to all COBRA participant that are currently receiving the subsidy or the newly unemployed or both.

Regardless employers will need to prepare for the changes and administration of this extension.  I will keep everyone in the loop as to the status of this change.

 

Final Regulations on Excise Taxes for Group Health Plans Released

Group health plans are responsible for compliance with a number of federal laws governing issues such as continuation coverage and portability of health coverage. If a group health plan does not comply with applicable group health plan requirements, the employer maintaining the plan is subject to an excise tax. Employers are also subject to an excise tax if they do not satisfy comparable contribution rules for health savings accounts (“HSAs”) and Archer medical savings accounts (“MSAs”). The Internal Revenue Service (IRS) has issued final regulations on reporting and paying the applicable excise tax, which are effective January 1, 2010

Group Health Plan Rules Subject to Excise Tax

Generally, an excise tax of $100 per individual per day will apply to violations of the following rules (“Group Health Plan Requirements”):

  • Continuation coverage (COBRA);
  • Portability and nondiscrimination for health coverage (HIPAA);
  • Genetic information nondiscrimination (GINA);
  • Parity between mental health benefits and medical/surgical benefits (Mental Health Parity and Addiction Equity Act);
  • Minimum hospital lengths of stay in connection with childbirth (Newborns’ and Mothers’ Health Protection Act); and
  • Continued coverage for post-secondary students with a serious medical condition (Michelle’s Law).

For violations of the comparable contribution rules for HSAs and Archer MSAs, the excise tax will generally be 35 percent of the amount contributed by the employer to the Archer MSAs or the HSAs of all employees within the applicable calendar year.

For more information got to the IRS Regs

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