ABC Taxes, Tips & Tools

Con­gress sent a $636 bil­lion defense mea­sure to the pres­i­dent last Sat­ur­day, Decem­ber 20, 2009; Obama signed it into law.  With the stroke of a pen, the pop­u­lar COBRA sub­sidy was enhanced and extended.  Don’t you just love how lit­tle one has to do with the other?

Laid-off work­ers wor­ried about mak­ing their COBRA pay­ments are breath­ing a lit­tle easier.

The COBRA sub­si­dies, which helped make con­tin­u­a­tion health care cov­er­age more afford­able for invol­un­tar­ily ter­mi­nated work­ers, were set to expire on Dec.  31.  Under the exten­sion most eli­gi­ble work­ers will be able to ben­e­fit from the sub­si­dies through Feb.  28, 2010.

The Con­sol­i­dated Omnibus Bud­get Rec­on­cil­i­a­tion Act (COBRA) allows work­ers to stay on their employ­ers’ health insur­ance plans after they’ve been ter­mi­nated if they keep up the pre­mium pay­ments.  The 65% sub­si­dies were orig­i­nally enacted in Feb­ru­ary 2009 as part of the eco­nomic stim­u­lus law known as the Amer­i­can Recov­ery and Rein­vest­ment Act (ARRA).  That meant if a laid off worker had fam­ily cov­er­age with a COBRA pre­mium of $800, their for­mer employer would pick up 65% the tab ($520), and the fam­ily would pay the other 35% ($280). For many laid off work­ers this sub­sidy meant the dif­fer­ence between hav­ing health cov­er­age and not hav­ing health coverage.

The new legislation:

• Expands the max­i­mum sub­sidy period from 9 months to 15 months and includes peo­ple cur­rently receiv­ing the subsidy.
• Extends the qual­i­fy­ing time dur­ing which work­ers must have been laid off; now it’s extended through Feb.  28, 2010.
• Pre­vi­ously, if work­ers had been laid off in Decem­ber 2009 but weren’t eli­gi­ble for COBRA cov­er­age until Jan­u­ary 2010, they wouldn’t have been eli­gi­ble for the sub­si­dies at all.  This law closes that cov­er­age hole, now these laid off work­ers are eligible.
• Extends cov­er­age for peo­ple who had already used up 9 months of sub­sidy eli­gi­bil­ity under the orig­i­nal leg­is­la­tion.  If a laid off worker retroac­tively pay back for COBRA cov­er­age dur­ing the lapsed months they can qual­ify for the extended coverage.
• Requires plan admin­is­tra­tors to notify eli­gi­ble for­mer employ­ees of the sub­si­dies’ availability.

The law does not change other rules regard­ing COBRA or the sub­sidy, which means HR depart­ments may also breathe a sigh of relief as they do not have to untan­gle the logis­ti­cal night­mare that would have resulted from the expi­ra­tion of the orig­i­nal subsidy.

As always, small busi­ness ser­vices and tax­a­tion are our busi­ness.  If you need help Please give Art & Busi­ness Con­sult­ing a call.  We would love to engage you as a client.

The usual dis­claimers: Although ABC has made every effort to insure the accu­racy of Taxes, Tips and Tools, mis­in­for­ma­tion, dis­in­for­ma­tion, changes, mis­takes, typos and hack­ers hap­pen, there­fore Art & Busi­ness Con­sult­ing LLC takes no respon­si­bil­ity for any action taken or results based on the infor­ma­tion sup­plied here in.  Inter­nal Rev­enue Ser­vice Cir­cu­lar 230 Dis­clo­sure:  As pro­vided for in Trea­sury reg­u­la­tions, advice (if any) relat­ing to fed­eral taxes that is con­tained in this com­mu­ni­ca­tion (includ­ing attach­ments) is not intended or writ­ten to be used, and can­not be used for the pur­pose of (1) avoid­ing penal­ties under the Inter­nal Rev­enue Code or (2) pro­mot­ing, mar­ket­ing or rec­om­mend­ing to another party any plan or arrange­ment address herein.  Art & Busi­ness Con­sult­ing LLC cur­rently does not have a cer­ti­fied pub­lic accoun­tant or an attor­ney on staff; this infor­ma­tion is purely for edu­ca­tional pur­poses and not to be con­strued as legal or finan­cial advice.  Art & Busi­ness Con­sult­ing LLC and its employ­ees, mem­bers and asso­ciates are not engage to prac­tice law; you always should dis­cuss legal mat­ters with your attor­ney before talk­ing to any­one else.

Tags: COBRA subsidy, extension, health insurance

This entry was posted on Tuesday, December 22nd, 2009 at 4:41 pm and is filed under HR Info. You can follow any responses to this entry through the RSS 2.0 feed. Responses are currently closed, but you can trackback from your own site.