The COBRA subsidy program was set to expire, but President Obama extended for one month the program enacted under the American Recovery and Reinvestment Act. [HR 4691, The Temporary Extension Act of 2010.]

Under the program, eligible individuals pay 35% of their healthcare premiums, and the feds reimburse the employer for the remaining 65% through a tax credit.

The fine print
So why just one month? Congress wants to extend the program through the end of the year but needs to decide how it’ll enact revenue provisions to pay for certain programs (e.g., COBRA subsidy and unemployment benefits programs). The extension buys legislators another four weeks.

To qualify for the subsidy, people must experience a COBRA-qualifying event – i.e., be involuntarily terminated – between 9/1/08 and 3/31/10. Note that the subsidy’s now also available to those who:

• first lose their coverage because of a reduction in hours between 9/1/08 and 3/31/10, and
• are then involuntarily terminated on or after 3/2/10 but by 3/31/10.

The premium reduction applies to periods of health coverage that began on or after February 17, 2009 and lasts for up to 15 months.

Right now, the Senate’s debating HR 4213, which would extend the COBRA subsidy program through the end of the year. We’ll keep you posted.

You’ll find updated COBRA info on the Department of Labor’s Web site.

The deadline for eligibility for the 65% health insurance premium subsidy has now been extended to those who are laid off through March 31. Previously, eligibility only extended to those who lost their jobs through Feb. 28.

Those eligible can still receive the subsidy for 15 months.

Last week, the House passed the one-month extension, but the bill got held up in the Senate until Tuesday. Once it passed the Senate, Obama quickly signed it into law.

The bill also allows thousands of workers whose unemployment benefits expired on Feb. 28 to receive them for another 30 days. The Department of Labor estimated nearly 400,000 could’ve seen their aid cut if Congress didn’t act.

Congress will now consider a much larger bill that would extend the COBRA subsidy and unemployment benefits through the end of the year.

We’ll keep you posted.

Hope your people are getting used to the extra paperwork and headaches associated with the COBRA subsidy — because it looks like another extension may be on its way.

The Obama administration has proposed the 65% health insurance premium subsidy be extended yet again.

The latest extension is tucked inside the administration’s proposed federal budget for fiscal year 2011. Under the proposal, employees laid off from March 1, 2010 through Dec. 31, 2010 would be eligible for the subsidy for up to 12 months.

Currently, employees laid off from Sept. 1, 2008 through Feb. 28, 2010 can receive the subsidy for up to 15 months. The latest extension would not affect those workers.

What do you think of this latest proposal? Let us know in the Comments Box below.

A new notice explaining that workers are now eligible for the 65% premium subsidy until Feb. 28 — and that the assistance period has also been extended from nine months to 15 — has to be sent to employees by Feb. 17.

The model notices are available on the Department of Labor’s (DOL) Web site here.

IRS says taking a credit in the wrong quarter for a subsidy the employee received in 2009 but paid for in 2010 could create a big paperwork hassle. Say a former worker pays his 35% share of the COBRA premium for 2009 coverage on 1/20/10. You may claim the credit for the related premium subsidy on Form 941 for either:

• the quarter in 2010 in which you receive the individual’s 35% premium payment, or
• a later quarter in 2010.

The credit can’t be claimed for a quarter in 2009, regardless of the fact that the premium is for coverage during 2009.

In all cases, however, if an employer chooses to reduce its payroll tax deposits during the quarter based on the receipt of the individual’s 35% premium payment, the company must claim the credit for the related subsidy amount on Form 941 for the quarter during which its payroll tax deposits were reduced. In addition, of course, an employer may only claim credit for the subsidy amount once.

Under the American Recovery and Reinvestment Act of 2009, most employers report the 65% subsidy for COBRA continuation health insurance premiums, and most do so on Form 941. However, IRS just clarified in its Q&A (question FP-1) that certain companies not required to file a 941 still must report this data elsewhere. Specifically:

• Small employers that file Form 944, Employer’s Annual Federal Tax Return – generally those with an estimated employment tax liability of $1,000 or less in the calendar year – may claim their COBRA credit on Form 944 (line 11a), and
• Agricultural employers may claim the COBRA credit on Form 943, Employer’s Annual Federal Tax Return for Agricultural Employees (line13a).

Employees who are involuntarily terminated between 9/1/09 and 2/28/10 may receive these subsidies for up to 15 months (previously nine months).

You’ll find more COBRA questions and answers here.

President Obama just signed a bill extending the federal COBRA subsidy by six months. It goes into effect immediately.

The nine-month, 65% premium subsidy has been extended to a total of 15 months.

Plus, the subsidy is available to employees or dependents who lose coverage under a group health plan (as the result of an employee’s involuntary termination of employment) through Feb. 28, 2010 — changed from Dec. 31, 2009.

The legislation also provides an additional six months of subsidized coverage for those whose initial nine-month subsidy has run out.

And beneficiaries whose subsidy ran out, and who didn’t pay the full premium, even have a second chance to opt for coverage.

Example: Employees whose subsidy period ran out Nov. 30 — and who couldn’t come up with the full insurance premium for December — can pony up their 35% share in January and get retroactive coverage for December.

The extension, passed by both houses of Congress as an add-on to the Department of Defense Appropriations Act of 2010, was signed by President Obama Dec. 21.

The initial subsidy, part of the Obama administration’s American Recovery and Reinvestment Act, called for a 65% subsidy on the premiums terminated employees must pay to continue their health coverage under COBRA. It was set to expire Dec. 31.

As you remember, employers were required to cover subsidy payments, which could then be reimbursed through reductions in federal payroll taxes.

New deadline: Feb. 28
The new law, which goes into effect immediately, extends employee eligibility for the subsidy to Feb. 28, 2010. It also extends the subsidy period from the current nine months to 15 months.

The legislation gives employees whose nine-month subsidy has run out another six months of premium assistance.

Final wrinkle: Employees whose subsidy period ran out Nov. 30 — and who couldn’t come up with the full insurance premium for December — can pony up the 35% and get retroactive coverage for the final month of the year. They’d then be able to receive the subsidy for another five months.

The bill also includes an amendment providing an additional 13 to 20 weeks of unemployment benefits, increasing payments by about $25/week.

That’s not the end of the story for the COBRA subsidy program, though – there’s another bill waiting in the wings. The Jobs for Main Street Act of 2010 (HR 2847), passed by the House last week, would also extend the eligibility deadline for COBRA premium subsidy payments for six months, to 6/30/10. However, this bill likely faces revisions in the Senate. We’ll keep you posted.

New guidance has been issued by the Department of Labor to end the confusion surrounding COBRA subsidy eligibility.

While the feds are offering up a 65% nine-month COBRA premium subsidy to workers involuntarily terminated in the period between Sept. 1, 2008 and Dec. 31, 2009, some who lost their jobs during that time won’t be eligible.

What would keep a terminated employee from being eligible for COBRA? Being covered by their former employer’s health plan through Dec. 31, 2009.

As a result, the worker wouldn’t be eligible for COBRA until Jan 1, 2010 — just missing the cutoff for the subsidy.

On the other hand, if the person was terminated by Dec. 31 and was eligible for COBRA, he or she could receive the subsidy for a full nine months — even if that nine-month period extends well into 2010.

Two bills have been introduced to extend and even expand the COBRA subsidy, but the fate of the legislation remains unclear.

Legislation introduced in the House of Representatives by Rep. Joe Sestak (D-PA) would extend the subsidy and make those laid off from Jan. 1, 2010 through June 30, 2010 eligible.

Under the proposed bill, the subsidy would be provided for up to 15 months.

Currently, the subsidy is available for up to nine months for people who lost their jobs after Sept. 1, 2008 — and it won’t be available to employees laid off after Dec. 31, 2009.

Without an extension, people who began collecting the subsidy March 1 — when it first became available — will lose it at the end of November.