March 3rd, 2009
The $787 billion American Recovery and Reinvestment Act signed by President Obama includes a subsidy for newly unemployed workers to maintain their group healthcare coverage. The law becomes effective March 1, 2009.
The subsidy aims to help these workers by paying 65 percent of COBRA or state continuation premiums for up to nine months, with eligibility limited by income. Joint tax filers with $250,000 or more of modified adjusted gross income (AGI) and all other filers with $125,000 or more of modified AGI are not eligible for the full subsidy. The subsidy is phased out for individuals with AGI of $290,000 joint or $145,000 for other filers. The subsidy will be available to those who involuntarily lose their jobs between Sept. 1, 2008, and Dec. 31, 2009.
The Department of Labor has 30 days from when the bill was signed to provide sample documents, and then the groups and COBRA administrators have 60 days to make any required system modifications and complete the member mailings. Ceridian will be prepared by April 18 with all necessary system changes.
Employers that work with a different COBRA administrator should contact that company. Employers that administer COBRA benefits internally should contact their internal legal/compliance area.
Note on State Continuation: State Continuation, which varies by state, is expected to follow similar guidelines as COBRA. Some questions need to be clarified regarding the subsidy, notifications and taxes. We will update you as information becomes available.
Find out more about the COBRA subsidy at the American Benefits Council Website.
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