COBRA, ARRA and IT

A rash of calls recently from clients with a common question brings about this post.

If you have an employee who does not return to work after a leave of absence, and that employee is considered terminated from employment when that occurs, then the employee is entitled, according to the U.S. Department of Labor, to elect the COBRA premium subsidy as provided by the ARRA.

And yes, IRS Notice 2009-27 does state, "An involuntary termination means a severance from employment due to the independent exercise of the unilateral authority of the employer to terminate the employment, other than due to the employee’s implicit or explicit request, where the employee was willing and able to continue performing services." While the "willing and able to continue performing services" appears to conflict with a situation facing an employee who does not return from a leave of absence, nonetheless, the employee is an assistance eligible individual.

Holiday expansion

Most of us think of the holidays as a time to celebrate, be with the ones we love, and, unfortunately, put on a few pounds. This year, thanks to our Executive and Legislative Branches, any waistline gain wasn't the only expansion going on.

On December 19, 2009, President Obama signed a bill that allows the COBRA premium subsidy law to continue beyond its original sunset date of December 31, 2009. In the course of passing this extension, provisions were also added which expands the group of Assistant-Eligible Individuals ("AEIs").

Some highlights:

• The subsidy period is increased from 9 to 15 months
• A qualifying event for the subsidy is now covered by the period of September 1, 2008 through February 28, 2010.
• If a former employee is now an AEI due to this amendment, that former employee has a transition period.
• If you have an AEI who (1) did not timely make a COBRA premium payment prior to the passing of this amendment or (2) paid a full premium when now it could be a subsidized premium, you must give that AEI a notice of the new law. This notice is to be issued within the first 60 days of the AEI's transition period.
• If you have a former employee who became an AEI after October 31, 2009, you must provide that former employee with the new notice.

The amendments include other provisions which will be of interest to employers. Employers should consider contacting their third-party administrators or legal counsel to discuss how the amendments might impact them.

ARRA/COBRA Poster

For those of you who have health benefits plans subject to COBRA, here is a new poster from the Department of Labor detailing information on the premium reduction resulting from the American Recovery and Reinvestment Act:

http://www.dol.gov/ebsa/pdf/joblossposter2.pdf

Are you sure this fuss isn't just over a set of golf clubs?

For HR professionals, all the discussion threads about COBRA probably make you wish that the golf company by the same name was simply unveiling a new, state-of-the-art line of rescue woods. Alas, not so (well, maybe Cobra is doing something like that, but that's not the point of this entry).

The economic stimulus package known as the American Recovery and Reinvestment Act of 2009 ("ARRA") brings much hope with it that jobs will be stabilized and the economy rejuvenated. For those of you in HR, it would appear that you have yet another layer of job security. The ARRA means changes to our methodologies if we want to avail ourselves of the carrots dangling from the sticks. When those methods are "adjusted," it almost always means a wave of new rules for HR professionals and the laws within which they work.

COBRA is significantly impacted by the ARRA:
1. A COBRA subsidy is now available, where the government provides 65% for continuation coverage premiums for up to 9 months (in your best commercial narrator voice: certain exclusions may apply).

2. But we know that "free" money from the government isn't really free, right? Correct! (in your best Alex Trebec impersonation). The subsidy actually comes from the employer's pocket, to be paid upfront. The employer then is allowed to deduct the 65% figure from the Social Security and Medicare taxes paid.

3. Pull out those personnel records, because the COBRA subsidy is backdated to September 1, 2008. That means that you should quickly refresh your memory on who has experienced a COBRA-qualifying event from September 1, 2008 and. . . .

4. Letters/notices should be sent to those who qualify for the subsidy. Your plan administrator should handle this step for you, but you should get in touch with said administrator to ensure that nothing is needed from you, especially if you have changed insurance carriers since September 1, 2008.

5. While you're furiously scribbling down notes on the ARRA, jot down this action item: amend group health plan documents to show that the ARRA COBRA changes have been adopted and incorporated.

6. Remember that "some exclusions may apply" caveat? One exclusion is for health care flexible spending accounts--those are not eligible for the subsidy.

7. The retroactive nature of the ARRA does not mean that subsidies will reach back that far. Rather, those who fall within this time frame are to be given another opportunity elect COBRA. The subsidy will become effective on the first COBRA continuation period after the enactment of the ARRA. For most of you, that would mean March 1, 2009.

You should work with your plan administrator to identify those individuals who may be eligible for the subsidy payment and calculate the premium payment now required under ARRA.

Isn't it nice to be needed?