In-Depth Articles Federal Stimulus Includes Changes to COBRA Health Coverage.  The American Recovery and Reinvestment Act of 2009 includes changes to the health benefit provisions of the Consolidated Omnibus Budget Reconciliation Act of 1985, commonly referred to as COBRA. The new law will affect former employees and their families, employers and others involved in providing COBRA coverage. Under the new law, employees involuntarily terminated between September 1, 2008, and December 31, 2009, and enrolled in their employer’s health plan at the time they lost their jobs, are required to pay only 35 percent of the cost of COBRA coverage. Employers must treat the 35 percent payment by eligible former employees as full payment, but the employers are entitled to a credit for the other 65 percent of the COBRA cost on their payroll tax returns. This subsidy terminates upon offer of any new employer-sponsored healthcare coverage or eligibility for Medicare. Eligible former employees who initially failed to elect COBRA coverage because it was unaffordable must be given an extra 60 days to elect coverage and receive the subsidy. These individuals must also state that their same-year income will not exceed $125,000 ($250,000 Joint) for individuals.   Employers must maintain supporting documentation for the credit claimed. This includes: Documentation of receipt of the employee’s 35 percent share of the premium. In the case of insured plans: A copy of invoice or other supporting statement from the insurance carrier and proof of timely payment of the full premium to the insurance carrier. Declaration of the former employee’s involuntary termination. COBRA provides certain former employees, retirees, spouses, former spouses and dependent children the right to temporary continuation of health coverage at group rates. COBRA generally covers health plans maintained by private-sector employers with 20 or more full and part-time employees. It also covers employee organizations or federal, state or local governments. It does not apply to churches and certain religious organizations. The new COBRA subsidy provisions also apply to insurers required to offer continuation coverage under state law similar to the federal COBRA.   If you have any questions about the COBRA subsidy, please give us a call.   Back to In-Depth Articles Back to Resources   To ensure compliance with requirements imposed by the IRS, we inform you that any tax advice contained in this communication is not intended or written to be used, and cannot be used for the purpose of avoiding penalties assessed under the Internal Revenue Code.