The American Recovery and Reinvestment Act of 2009 carries a lot of changes for employers, not the least are changes to COBRA coverage. Under the new law, eligible employees who were enrolled in their employers' health plans when they lost their jobs will be able to receive COBRA coverage, but are required to pay only 35 percent of the premium. Employers can redeem the remaining 65 percent in the form of a tax credit on their quarterly payroll tax return.
From the IRS Web site:
"The employer may provide the subsidy — and take the credit on its employment tax return — only after it has received the 35 percent premium payment from the individual."
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To help employers address the new requirements, the IRS posted detailed information on its Web site, including updated forms and frequently asked questions.
"This is the first step in our effort to provide employers with information on this important health benefit for people who have lost their jobs," IRS Commissioner Doug Shulman said in a press release. "We will continue our work in the weeks ahead to help employers implement this crucial change for the nation's unemployed."
Employers are not required to submit additional information when they file the payroll tax return, however, the updated form does require supporting documentation for a claim:
- The date the employee was terminated, which must fall between Sep.1, 2008 and Dec. 31, 2009;
- Dates and amounts of the former employee's 35 percent share of the premium;
- Proof of the former employee's eligibility under COBRA coverage and their election of such coverage; and
- Social Security numbers for all covered employees, the amount each employee was reimbursed and how many individuals the subsidy covered.
Visit www.irs.gov to learn more about changes to COBRA
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