Spring 2009 SBH Work Comp Quarterly
Employment Law Update
PDF FormatHow COBRA Changes Impact Your Workplace
As a result of the American Recovery and Reinvestment Act of 2009 signed into law by President Obama, a new provision for COBRA benefits has emerged. Certain employees are now entitled to receive a 65% subsidy for premiums for a period of up to 9 months.
These changes impact COBRA benefits for employees who are involuntarily terminated from employment between September 1, 2008 and December 31, 2009 and have an annual income less than $125,000 (single) or $250,000 (joint filing). Individuals who were involuntarily terminated on or after September 1, 2008 and declined COBRA coverage must also be given a new opportunity to enroll.
The employees will pay 35% of the full premium. The employer (or health plan or insurer - whoever would typically receive premium payments) must cover the remaining 65%. The employer then applies to the government for a payroll tax credit equal to the 65% subsidy. If the employer does not have payroll taxes equal to the full amount of the subsidy, it can apply for a direct reimbursement.
The new law creates a host of new obligations for employers. The primary obligation will be to notify employees about the subsidy and maintain supporting documentation for the claimed credit. Employers must maintain documentation pertaining to an employee's election of COBRA continuation, the involuntary termination and payment of their 35% premium share. The employer must submit documentation with its request for payroll tax credit/reimbursement.
Employers may ask how this subsidy will impact other laws and obligations in the employment context. The new provision states the entire premium should be treated as if the employee still pays 100% and the 65% subsidy should not be considered additional compensation to the employee. But does the subsidy impact obligations such as workers' compensation benefits, for example calculations of time loss benefits for Washington claims? Many such questions are expected to be encountered by employers and SBH will continue to monitor and provide legal updates regarding this evolving area of law.
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