Human Resources News & Insights

Feds issue followup on COBRA tax credits for employers

The Internal Revenue Service released new detailed information that will help employers claim credit for the COBRA medical premiums they pay for their former employees.

Under the new law, eligible former employees, enrolled in their employer’s health plan at the time they lost their jobs, are required to pay only 35% of the cost of COBRA coverage. Employers have to pay the remaining 65% but are entitled to a credit on their payroll tax return.

You must have supporting documentation for the credit claimed, including:

  • Documentation of receipt of the employee’s 35% share of the premium.
  • For insured plans, a copy of an 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.

Also, the IRS announced  that Form 941, Employer’s Quarterly Federal Tax Return, will be sent to about 2 million employers in mid-March. The form is used to claim the new COBRA premium assistance payments credit, beginning with the first quarter of 2009.

For more information about COBRA payments and the new law, go to:,,id=204708,00.html,,id=204505,00.html

“Obama stimulus package contains 6 big paperwork changes for you”

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  1. Has anyone heard anything about dental? If our dental plan is COBRA eligible, is it included? Employees pay the full premium, so if it is included they will be getting a BETTER deal after termination! 🙂

  2. Question…if an employee was involuntary terminated due to the employee not being able to perform the essential functions of his/her job would they qualify for the COBRA medical premium? The person was involuntary terminated

  3. KSchwan says:

    To PJ SPHR-
    Yes dental and vision are included in the COBRA stimulus along with medical. Our dental and vision are paid by the employees also but after termination, most of it will be paid by the gov’t.

  4. HR in GR says:

    To Rlgall:
    Everyone who is discharged involuntarily, will be eligible (as long as they were eligible while employed) unless they were terminated for gross misconduct. So the answer to your question would be, “Yes, they qualify”.

  5. I just received a letter prepared by our insurance TPA which stated that any employee who was involuntarily terminated after September 1, 2008 for any reason other than “gross misconduct” would be eligible for the COBRA subsidy. They neglected to define “gross misconduct”.

  6. HR in GR says:

    If the employee was denied unemployment due to misconduct, then it is my understanding (through my research and that of our TPA) that they would not be eligible for COBRA either.
    In the past, when we have let someone go for gross misconduct, I have offered COBRA knowing they wouldn’t be able to afford it anyway.
    With the “new” stimulus program and the 65% incentive, I can see more of our terminations taking advantage and I will not be offering it to those who do not qualify (based on UIA confirmation).

  7. Deborah says:

    to Rigall & Tom:
    COBRA eligibility is not determined based on cause for termination except when it comes to gross misconduct. Gross misconduct is usually defined by your state Unemployment office – or typically those issues that could result in criminal charges, legal charges, etc. of some kind…

  8. I have a question for you, if an employee didn’t take COBRA and was let go in December 2008, can they decide to take it now since it is going to be cheaper for them?

  9. Deborah says:

    to Edna:
    my understanding is that we do need to go back and offer to all COBRA-eligibile employees that were terminated from 9/1/08 to current. Further:
    – they have 60 days to decide if they want to opt in now,
    – that they would be eligible from March 1st going forward BUT it doesn’t extend the COBRA period past what their original length of COBRA would be (ex: December elector is good for 18 mos. from December – that doesn’t change – it is not 18 mos. from March)

  10. Does anyone know where we could find sample notices to mail to eligible employees to notify them of the COBRA change? I looked on the DOL website – there is nothing there, yet.

  11. Does anyone know how the Cobra credit works if the company is a non-profit and does not pay taxes and therefore does not take tax credits?

  12. AvramS:

    Please post anything you may find out about the tax credits for a non profit!


  13. deborah says:

    – I don’t beleive that the new notices have beenposted by government yet.
    – for non-profits: chekc out the IRS website – they could probably best help (said o=tongue-in-cheek)
    – there is a webinar 3/6 being hosted by WolfBlock LLP, a legal firm out of Philadelphia:The ARRA and New COBRA Compliance Obligations: What Employers Need To Know*

    March 6, 2009 | 10 – 11 a.m.

    Instructor: Amanda Layton

    The American Recovery and Reinvestment Act of 2009 (ARRA) that President Obama signed into law on February 17 contains provisions that require employers sponsoring group health plans to make almost immediate administrative changes to accommodate a new subsidy for health care continuation coverage provided under COBRA.

    Under the ARRA, any qualified beneficiary (employee, his or her spouse or dependents) who may lose or has lost coverage under a group health plan between September 1, 2008, and December 31, 2009, as a result of an involuntary employment termination must be offered a 65 percent continuation coverage premium subsidy for a period of up to nine months.

    Join us for this one-hour webinar as we explore the implications to employers under this new mandate. We’ll cover:

    Limitations to this subsidy

    Qualified beneficiaries to whom the subsidy may apply
    Best practices for staying in compliance with the new requirements

    Implementation requirements of the provisions
    Updating COBRA procedures to reflect new notice and enrollment processes
    The mechanics of claiming the employer credit – reporting and record retention requirements


    Cost and Registration

    This webinar is being offered free of charge to clients and friends of WolfBlock.

    To register for this program please click here

    On the “Meeting Summary” page, click “Register” and complete the requested information. Once the meeting host has accepted, you will receive an e-mail to that effect. The e-mail will also contain a link to the meeting and the dial-in information for the webinar.

    WolfWebinars can also be customized for (and limited to) your organization’s supervisors in the form of webinars. For such private webinars, the cost varies and is based on a number of factors – including number of supervisors per session, number of sessions per employer, client status and nonprofit status – to give employers the most effective use of their training dollars.

    If you have any additional questions about webinars or registration, please contact

    WolfWebinars Are Highly Interactive and Entertaining
    There are two components to WolfWebinars: an 800-number audio conference call enabling supervisors to speak at any time and a PowerPoint presentation accessed through a secure Internet web site. This presentation is also available to be downloaded as a reference material.

    Through the use of WebEx technology, supervisors will respond online to hypotheticals in real time.

    WolfWebinars provide legal training without supervisors ever leaving the premises. Optional, post-training assessment tools are available to provide feedback to supervisors and employers.

    A certificate of completion will be provided to each supervisor who participates in a public or private webinar, provided that he or she participates for the entire webinar.

  14. Judy Buckley says:

    Our insurance broker told me that their attorneys think this second chance notification should go to ALL those former employees who were covered on our insurance, not just those involuntarily terminated. From everything I’m reading here, and from our COBRA administrator’s analysis, I keep seeing that word “involuntarily” and I don’t know how these attorneys are interpreting this as applying to all, whether voluntarily or involuntarily terminated. The broker thinks all of this is still evolving, so we’re waiting a little to see how it turns out. Fortunately, we have low turnover and the four people who left since September 1, 2008 either left voluntarily or no longer had sufficient hours to be eligible for benefits.

    This gives you the details of what companys are not included in the subsidy

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