Here are eight of our readers’ most pressing questions, along with answers gleaned from weekly conference calls with IRS/industry partners, IRS’ Web site and various other resources:
1. “Who’s eligible for the subsidy?”
The most important thing to remember is that this new law did not affect who is/isn’t eligible for COBRA – eligibility rules remain the same. You can get more info on that point from www.dol.gov/ebsa/faqs/faq_compliance_cobra.html
As for the subsidy, the credit applies only to involuntarily terminated employees and their family members who are qualified beneficiaries. The involuntary termination must occur during the period from 9/1/08 through 12/31/09.
To clarify, an assistance-eligible individual can be any COBRA qualified beneficiary associated with the related covered employee (e.g., dependent child), who’s covered immediately prior to the qualifying event.
2. “March 1 came and went, and April 1’s almost here. When do I have to start paying the premiums for eligible former workers?”
The law took effect on 2/17/09. However, a transition rule says you may continue to pay the premium amount for up to two months after this (i.e., March and April). You can provide the subsidy retroactively in that case.
3. “We’re self-insured. Do the subsidy requirements still apply?”
Yes. All employers with plans subject to the COBRA requirements must comply with this law.
4. “Do we state on the 941 the dollar amount of the tax credit due as a refund, and receive the refund from the IRS?”
You need to download the newest version of Form 941 (www.irs.gov/pub/irs-pdf/f941.pdf). You’ll claim the credit on Line 12a, and include the number of individuals provided COBRA premium assistance on Line 12b. No other info relating to the subsidy is required on the form.
Say Line 12 is larger than Line 10. Line 13 would also be larger than Line 10, resulting in an overpayment that you could either:
1. apply to your next return, or
2. request as a refund.
If you choose to have the excess refunded, IRS will process the request (but you won’t receive any notification).
5. “Will Schedule B be the same as always, stating the actual liability for any given day, week or month?”
Yes. Schedule B is used to report an employer’s payroll tax liability for each payroll period – not the amount of the employer’s payroll tax deposits. Therefore, when you reduce a deposit by the COBRA subsidy amount, there’s no effect on your liabilities reported on the 941’s Schedule B.
Continue to show on your Schedule B (or in Part 2, Form 941) the total liabilities for all wages you reported on the 941.
6. “What resources can help us notify employees about these changes?”
The U.S. Department of Labor’s developing sample language to share with employees. Click this Web site for all sorts of resources, including English and Spanish versions of sample language, posters, etc.: www.dol.gov/ebsa/cobra.html
7. “I’m not sure we can meet the 4/30/09 deadline to file the new Form 941. Can I get an extension?”
Sorry, there’s no extension available.
8. “If the company I work for goes out of business, are employees still entitled to pay only the 35% toward their premium?”
No. Former employees on COBRA are still on their employers’ plans, so if there’s no company, there’s no health coverage (or anyone from corporate to pay for it, either).
