Good news: Feds nix COBRA reporting for ‘09
May 8, 2009 by Kerry IsbergPosted in: COBRA, Communication, Employment law, Records documentation, Special Report, Terminations
The Internal Revenue Service just let you off the hook for what could’ve been a big administrative hassle this year-end.
IRS recently announced it won’t require any information reporting (i.e., Forms W-2 or 1099) for COBRA premium assistance payments employers make on behalf of terminated employees.
There’s a tradeoff, of course. It’s likely that because you don’t have to officially inform employees of the subsidy amount, recipients will have to call you when they prepare their personal federal tax returns.
Some will have to pay back a portion of the subsidy, e.g., those with adjusted gross income of $125,000 or more; $250,000 for married taxpayers filing jointly. Assistance eligibility phases out completely for people with modified gross incomes of $145,000 or more; $290,000 for joint filers. They’ll return the subsidy amount by increasing their tax liability on the Form 1040.
To prevent your phone from ringing off the hook, consider compiling subsidy info throughout the year, as your company makes the premium payments, and issue a simple statement at year-end along with your W-2s or 1099s.
What you’ll need
The info you’ll need should be easy enough to find. As part of the COBRA subsidy program, the American Recovery and Reinvestment Act requires employers to maintain the following documentation:
- Dates and amounts of the assistance eligible individuals’ 35% share of the premium.
- A copy of the invoice or other supporting statement from the insurance carrier (when you have an insured plan) and proof of timely payment of the full premium to the insurance carrier required under COBRA.
- Proof of the (1) premium amount and (2) coverage provided to the assistance eligible individuals. (Self-insured plans only.)
- Attestation of involuntary termination, including the date of the involuntary termination (which must be between 9/1/08 and 12/31/09), for each covered employee whose involuntary termination is the basis for eligibility for the subsidy.
- Proof of each assistance eligible individual’s eligibility for COBRA coverage at any time during the period between 9/1/08 and 12/31/09, and election of COBRA coverage.
- Social Security Numbers of all covered employees, the amount of the subsidy reimbursed with respect to each covered employee, and whether the subsidy was for one individual or two or more individuals.
- Other documents necessary to verify the correct amount of reimbursement. Note that although your company must maintain this documentation, you’re not required to submit it with your Form 941.
Tags: COBRA, Form 941, Internal Reveneue Service, IRS, W-2
Are the Benefits of Automatic Enrollment Worth the Cost?
May 8th, 2009 at 8:02 am
Can you please cite your sources when you post articles like this? I searched the IRS website and was unable to find any reference to W2 and 1099 reporting not being required. In an earlier article you said that the IRS was rejecting COBRA subsidies and I could not source that either so I posted it on a few message boards and did a Google search and still came up empty. I am beginning to doubt the credibility of the information I find on this website.
May 8th, 2009 at 8:09 am
Michele:
Announcements such as this one are made at the weekly IRS conference call attended by one of our reporters from HR Morning. The IRS does not necessarily follow up such announcements with info on the agency Web site. Nevertheless, the information is accurate. To verify, you can contact your local IRS office.
Jim Giuliano
Managing Editor
HR Morning
May 11th, 2009 at 4:37 pm
Michelle,
I value the HR Morning emails because I’ve received many a “heads-up” re: legislation changes and/or updates.
I was somewhat surprised by this article in terms of not requiring the w2/1099 but honestly wasn’t that surprised as I did question how on earth an employer was to provide a W2 or 1099 when the subsidy was given to a dependent of a former employee (i.e. s/he was never on our payroll).
But long-tory-short wanted to post a comment as I have found that the HR Morning emails give me a “flag” to keep an eye out for additional information re: issues such as this. They’ve usually been followed w/ further details, links, etc. from additional sources such as SHRM, IRS, DOL or my external counsel.
Just my two cents.
Gracie
May 11th, 2009 at 5:21 pm
“Assistance eligible individual’s eligibility”… “confusion, blackout”!!! Please tell me this is info my TPA has or will be acquiring. I almost cried reading, let alone carrying out in my humble HR department of .
May 11th, 2009 at 5:38 pm
Nikkita,
Who ever administer’s your Cobra will have this information. They had to send out eligibility notices by April 18th, and employees have 60 days to complete the forms and return them to the company. YOU would only be required to know if you self-administered.
May 18th, 2009 at 3:16 pm
This only applied to “Involuntary” terminations, correct?
May 20th, 2009 at 1:59 pm
Janie,
Yes, the separations/terminations must be involuntary to qualify for the COBRA subsidy.
June 16th, 2009 at 3:30 pm
Not only must the separations be involuntary to qualify for the subsidy, but the separation also must be through no fault of the employee (i.e. lay offs). If the employee was involuntarily terminated for cause then he/she would not be eligible for the subsidy.