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![](3D"http://www.bizactions.com/content/images//calendar%20numbers.jpg")
March 1 is a Key =
COBRA=20
=
Date |
The time is =
now for many employers because of =
one=20
little-publicized provision in the new =
economic=20
recovery act passed by Congress and signed =
into=20
law last week by President =
Obama.
Tucked =
inside the=20
nearly 1,100 pages of the American =
Recovery=20
and Reinvestment Act of 2009 =96 also =
known as=20
the economic stimulus bill =96 =
are several=20
new provisions in the COBRA law. (COBRA is =
the=20
federal law and similar state laws that =
give=20
terminated employees and their spouses,=20
ex-spouses, and dependents the right to =
continue=20
health insurance coverage if covered under =
an=20
employer plan at the time of =
termination.) =20
The key=20
provision: Individuals with COBRA =
rights=20
who declined to continue health =
insurance=20
coverage after a termination going back to =
Sept.=20
1, 2008 now have the right to choose to =
continue=20
the coverage...with a government-paid =
subsidy of=20
the insurance premium through=20
2009.
|
Involuntary Job=20
=
Loss? |
|
Who are=20
involuntarily terminated=20
employees? COBRA benefits are =
available=20
to voluntarily and involuntarily=20
terminated employees =96 excepting =
employees=20
terminated for gross misconduct and =
their=20
qualifying spouse, ex-spouse, and =
dependents=20
covered in an employer's health =
insurance plan.=20
But...which employees are =
involuntarily=20
terminated for gross=20
misconduct?=20
![](3D"http://www.bizactions.com/content/images/health_benefit2icon.jpg") The =
new law does=20
not define involuntary termination =
for=20
misconduct. Employers can expect=20
disagreements with some individuals on =
whether=20
or not an employee's employment is =
involuntarily=20
terminated. Individuals involved in such =
a=20
dispute can appeal in a newly created =
appeal=20
process within the Department of Labor =
(DOL).=20
The DOL will have 15 days to determine =
the=20
individual's eligibility for the COBRA=20
subsidy.
What's =
an Employer=20
to Do?
First, =
when=20
terminating an employee for any reason =
obtain=20
and retain written documentation that =
confirms=20
the reason or reasons for the employee's =
job=20
separation. For example, do exit =
interviews with=20
departing employees and have departing =
employees=20
complete an Exit Interview Form on which =
they=20
indicate the reason or reasons for the =
job=20
separation.
Second, assume =
that any=20
termination that occurs because =
of the=20
employer's actions is likely an =
involuntary=20
termination.
Third, do =
NOT engage=20
in constructive discharge. In other =
words, do=20
not engage in activities that encourage =
or force=20
an employee to quit a job and expect to =
evade=20
responsibility for a=20
termination.
|
|
Still=20
More=20
=
Benefits |
| The new economic stimulus law =
also=20
includes these changes affecting =
employers and=20
employees:=20
- The current extension of =
unemployment=20
benefits =96 providing the unemployed up =
to 33=20
weeks of benefits =96 will run through =
Dec. 31,=20
2009.
=20
Unemployment=20
benefits are increased by $25 per week =
using=20
federal funds, through December,=20
2009.=20
Funds =
are provided=20
to states to encourage specific reforms =
that=20
will increase unemployment insurance =
coverage=20
for low-wage, part-time, and other =
jobless=20
employees.=20
A new =
hiring=20
incentive is a tax credit equal to =
40=20
percent of the first $6,000 of =
wages paid=20
to employees who are unemployed veterans =
or=20
"disconnected youth." =
Disconnected=20
youth are defined as individuals between =
age 16=20
and 25 who have not been regularly =
employed or=20
attending school in the past six=20
months.=20
For 2009 =
and 2010,=20
employed individuals and families within =
certain=20
income limits will receive a refundable =
tax=20
credit of $400 or $800. For employees, =
this=20
credit will be in the form of reduced=20
withholding from their =
paychecks.
Unemployed=20
individuals also get some help. The =
first $2,400=20
of unemployment benefits will be exempt =
from=20
federal income tax for 2009.=20
=
| The key=20
date, March 1: Employers who have =
terminated employees between Sept. 1, 2008 =
and=20
March 1, 2009 must notify qualifying =
employees who=20
had declined COBRA coverage that they (and =
their=20
spouses, ex-spouses, and qualifying =
dependents)=20
now have the right to choose to continue =
the=20
coverage. And employers who terminate =
employees on=20
or after March 1, 2009 must notify newly=20
terminated employees and their qualifying =
spouses,=20
ex-spouses, and dependents of the right to =
continue coverage if they've been covered =
in the=20
employer's benefit =
plan.
Key COBRA=20
Changes
The new =
economic=20
stimulus law is a $787-billion package of =
tax cuts=20
and new spending and subsidies intended to =
give a=20
major boost to job creation and the U.S. =
economy.=20
Some of those billions will go to =
subsidize the=20
health insurance premiums for individuals =
who=20
qualify for COBRA (continuation of health=20
insurance benefits) because of job loss =
going back=20
to Sept. 1, 2008.
Following are key=20
COBRA provisions in the stimulus =
law:
- A COBRA subsidy to help pay the =
premium for=20
health benefits. COBRA premiums may not =
exceed=20
35 percent of the cost, starting =
March 1.=20
The remaining premium cost must be paid =
by=20
employers...who then can claim a tax =
credit=20
against wage withholding and payroll =
taxes to=20
cover their paid portion of the premium. =
When an=20
employer's deductions from wage =
withholding and=20
payroll taxes don't cover all COBRA =
subsidy, the=20
employer files with the Internal Revenue =
Service=20
(IRS) for the remaining =
amount.
=20
The premium subsidy continues for up =
to nine=20
months for qualifying individuals =
(voluntarily=20
and involuntarily terminated employees =
=96 except=20
employees terminated for gross =
misconduct -- and=20
their qualifying family =
members).=20
Qualifying individuals who declined =
to take=20
COBRA benefits between Sept. 1, 2008 and =
March=20
1, 2009 have a new 60-day election =
period during=20
which they can choose to enroll in the=20
subsidized COBRA coverage. (Such =
election of=20
coverage begins March 1 and is not =
retroactive=20
to a prior date.)=20
The COBRA premium subsidy will =
continue=20
through Dec. 31, 2009.=20
The temporary COBRA subsidy is =
available to=20
qualifying individuals under the federal =
COBRA=20
law and similar state and governmental =
medical=20
benefit continuation coverage =
laws.
The government recaptures part or =
all of the=20
COBRA subsidy in the form of additional =
income=20
tax when the qualifying individual's =
adjusted=20
gross annual income is between $125,000 =
and=20
$145,000 (single filers) or $250,000 and =
$290,000 (joint filers). In addition,=20
individuals who anticipate that their =
annual=20
incomes will exceed those amounts in a =
taxable=20
year can waive the COBRA premium subsidy =
for=20
that year. The individual is not =
eligible for=20
the COBRA subsidy during the year in =
which his=20
or her federal adjusted gross income is =
more=20
than $145,000 (single filers) or =
$290,000 (joint=20
filers). =20
The COBRA 18-month continuation =
coverage=20
period remains the same and begins with =
the=20
individual's loss of health insurance =
benefits=20
in an employer plan due to the =
qualifying=20
employee's involuntary termination of=20
employment. =20
The employer may permit eligible =
individuals=20
to change their coverage option to a =
less=20
expensive choice when they elect to =
exercise=20
their COBRA rights. This is a change =
from the=20
previous COBRA provision that allowed =
qualifying=20
individuals only to continue the =
coverage option=20
they had as an active =
employee. =20
The employer must give notice to =
qualifying=20
individuals who were terminated Sept. 1, =
2008=20
and following that date who declined to =
use the=20
COBRA benefit. Employers are to use a =
federal=20
government issued model notice.=20
However, the applicable =
government agencies have 30 days =
following the=20
law's enactment (Feb. 17) to design and =
issue=20
the notice. Employers should begin to =
track down=20
the current address or contact =
information for=20
all eligible individuals to expedite the =
contact=20
process when a model notice is =
available.=20
Employers must send a notice to eligible =
individuals within 60 days of the date =
of=20
enactment of the new law.=20
The =
employer's=20
notice must tell eligible individuals they =
have 60=20
days to elect COBRA coverage. And =
employers must=20
tell eligible individuals the premium =
subsidy ends=20
when they become eligible for health =
insurance=20
coverage from another employer or when =
they enroll=20
and are covered in Medicare.
Who=20
Qualifies for COBRA?
How does an =
individual=20
become qualified to elect COBRA =
continuation of=20
benefits? And who is eligible for=20
qualification?
What are=20
qualifying events? Qualifying =
events that=20
trigger an individual's right to elect =
COBRA=20
continuation of health insurance benefits =
are the=20
following.
For=20
employees: (1) the voluntary or=20
involuntary termination of employment for =
reasons=20
other than gross misconduct, (2) reduction =
in the=20
number of hours of employment that =
disqualifies an=20
individual from employer-paid coverage in =
an=20
employer-sponsored health =
plan.
For=20
employees' spouses and =
ex-spouses: (1)=20
the voluntary or involuntary termination =
of=20
employment of the covered employee for =
reasons=20
other than gross misconduct, (2) reduction =
in the=20
number of hours of employment of the =
covered=20
employee that disqualifies an individual =
from=20
employer-paid coverage in an =
employer-sponsored=20
health plan, (3) the covered employee's =
becoming=20
entitled to Medicare, (4) the divorce or =
legal=20
separation of the covered employee, (5) =
the death=20
of the covered employee.
For=20
employees' dependent children: =
The same=20
five events listed above for spouses and=20
ex-spouses. In addition, loss of dependent =
child=20
status under the health plan=20
rules.
For =
eligibility for=20
COBRA continuation benefits the individual =
must=20
have been enrolled in the employer's =
health=20
benefits plan when the employee was =
working. And=20
the employer's health plan must continue =
in=20
effect.
[NOTE: =
Information and=20
guidance in this story is intended to =
provide=20
accurate and helpful information on the =
subjects=20
covered. It is not intended to provide a =
legal=20
service for readers' individual needs. For =
legal=20
guidance in your specific situations, =
always=20
consult with an attorney who is familiar =
with=20
employment law and labor =
issues.]
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