Cobra Guard Powerpoint


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Cobra Guard Powerpoint

  1. 1. The COBRA Changes in the American Recovery and Reinvestment Act of 2009
  2. 2. COBRA Changes in the ARRA g The American Recovery and Reinvestment Act of dR i t tA t f 2009 (H R 1) (H.R. COBRA Administration Changes March, M h 2009 COBRAGuard, Inc. Mission, Mission KS
  3. 3. SPEAKERS Kenneth A. Mason Partner, Spencer, Fane, Britt, & Browne, LLP. p Robert A. Meyers, Jr. y President & CEO, COBRAGuard, Inc. Michael S. Gallagher VP, National Accounts, COBRAGuard, Inc.
  4. 4. OVERVIEW American Recovery and Reinvestment Act (ARRA) provides federal subsidy equal to 65% of COBRA premiums for involuntarily terminated employees. Subsidy will be available for up to 9 months. ARRA enacted on February 17, 2009, with the subsidy generally available as of March 1, 2009. Employees terminated as l El i d long ago as SSeptember 1 b 1, 2008, will be eligible for the subsidy, which will require the p q provision of retroactive notices to these individuals.
  5. 5. ELIGIBILITY FOR SUBSIDY Employees involuntarily terminated between September 1, 2008, and December 31, 2009. Must be eligible for -- and elect -- COBRA coverage (or similar state-law continuation coverage, if employer has fewer than 20 employees). Subsidy also available to terminated employees’ covered dependents. Subsidy phased out for employees with adjusted gross incomes of $125,000 to $145,000 ($250,000 to $290,000 if filing joint return).
  6. 6. COVERED PLANS Subsidy applies to all employer-sponsored plans to which COBRA applies (medical (medical, dental, vision, and prescription drug). Only health flexible O l h lth fl ibl spending accounts are di t excluded. No exemptions f governmental employers for or voluntary (non-ERISA) plans.
  7. 7. MAXIMUM SUBSIDY PERIOD Subsidy available for up to 9 months (although maximum COBRA coverage period is still 18 months following termination of employment). py ) 9-month period measured from later of loss of regular coverage or March 1, 2009 -- even if termination of employment was prior to this date. Eligibility for subsidy lost if individual offered other employer group health coverage or eligible for Medicare benefits -- even if not enrolled in plan or entitled to Medicare. Eligibility for subsidy not lost if offered only dental or vision coverage, flexible spending account, employee assistance plan, or on-site medical clinic.
  8. 8. CALCULATION OF SUBSIDY Maximum subsidy equals 65% of total COBRA premium (including 2% administrative fee). But federal subsidy applies only to portion of COBRA premium not subsidized by employer. Example: Total COBRA premium is $800, but employer pays 50% of premium under severance policy. So federal subsidy would be only 65% of $400 or $260 $400, $260.
  9. 9. SUBSIDY MECHANICS If qualified beneficiary pays 35% of applicable premium, employer must pay other 65%. Employer may recover the 65% through a credit against payroll tax liability (including income tax withholding and both employer and employee shares of FICA). If subsidy exceeds payroll tax liability, employer may liability obtain payment from federal government under rules applicable to overpayment of payroll taxes. Under multiemployer plan plan must provide and then plan, recover subsidy. Under small insured plan (not subject to federal COBRA), insurer must provide and recover subsidy. ), p y
  10. 10. TRANSISTION RELIEF If plan is not able to implement subsidy procedures by March 1st, may continue to collect full COBRA 1st premium for months of March and April. Must then either (1) credit 65% subsidy amount for () y these months against future COBRA premiums or (2) refund amounts to COBRA beneficiaries. Amounts not fully credited within 180 days must be refunded within 60 days.
  11. 11. NOTICE OBLIGATIONS COBRA election notices must describe premium subsidy and enclose forms needed to establish y eligibility. Must also send notice to all employees terminating on or after September 1, 2008 – whether voluntarily or p , y involuntarily – along with forms needed to establish eligibility for subsidy. Deadline for providing retroactive notice is 60 days p g y after enactment date, or approximately April 18, 2009. Government to issue model notice by March 19, 2009.
  12. 12. RETROACTIVE COBRA ELECTIONS Any eligible individual whose involuntary termination of employment was on or after September 1, 2008, but before February 17, 2009, may elect COBRA coverage at any time 17 2009 up to 60 days after receiving retroactive notice. COBRA coverage would then be effective as of March 1, 2009, d b 2009 and be available f up t remainder of 18 il bl for to id f 18-month period th id (measured from termination of employment). Subsidy would be available for up to 9 months after March 1, 2009. Any gap in coverage must be disregarded when identifying a 63-day gap in coverage that would cause loss of p yg p g prior creditable coverage (for preexisting condition purposes).
  13. 13. OTHER CONSIDERATIONS No subsidy available if an individual is not entitled to COBRA – e.g., if terminated for gross misconduct. i dt Individual may not claim health coverage tax credit for any month in which this subsidy is received. COBRA beneficiary receiving subsidy must notify plan upon b if l becoming eligible f other i li ibl for h coverage or Medicare (may be assessed penalty of up to 110% of subsidy if notice is not provided).
  14. 14. OTHER CONSIDERATIONS Government will resolve dispute as to employee’s eligibility for subsidy within 15 days after employee’s request (replacing plan’s claims and appeals procedures for this purpose). Employer may – b t need not – allow subsidy- El but dt ll b id eligible individual to elect COBRA under any other plan covering active employees, so long as the COBRA premium for that coverage does not exceed the premium for the individual’s pre- termination coverage coverage.
  15. 15. EMPLOYER NEXT STEPS Identify all covered employees terminating employment on or after September 1, 2008 – py p , including their covered dependents. Determine which of these employees terminated involuntarily. involuntarily Coordinate with COBRA administrator and payroll service provider. p Review existing severance arrangements for possible revisions needed to allow terminated employees to receive this subsidy subsidy.
  16. 16. INELIGIBLE INDIVIDUALS A subsidy is not available if an individual is not entitled to COBRA – e.g., if terminated for gross misconduct. No subsidy available if an individual’s event was due to; Voluntary Termination; Reduction in Hours; Divorce or Dissolution of Marriage; Loss of Dependent Status under the Plan; Death of Employee Individual may not claim health coverage tax credit for any month in which this subsidy is received. COBRA beneficiary receiving subsidy must notify plan upon becoming eligible for alternative coverage or Medicare (may be assessed penalty of up to 110% of subsidy if notice is not provided).
  17. 17. PAYROLL TAX CREDITS The employer recoups the subsidy by claiming credits equal to the subsidy against their payroll tax deposits (filed on the the th new 941 F Form, LiLines 12 and 12b) 12a d 12b). No payroll tax credits may be taken until the reduced premium (35%) h b i has been received f i d from eligible i di id l li ibl individuals. The “Attestation of Involuntary Termination”, including the date of the involuntary termination (which must be during the period from Sept 1 2008 to Dec 31 2009) for 1, 31, each covered employee whose involuntary termination is the basis for the eligibility for the subsidy. Information on the Receipt, including dates and amounts, of the assistance eligible i di id l ’ 35% share of th f th it li ibl individuals’ h f the premium.
  18. 18. PAYROLL TAX CREDITS Insured Plans; copy of the invoice or other supporting statement from the insurance carrier and proof of timely py payment of the full p premium to the insurance carrier required under COBRA. Self-Insured Plans; proof of the premium amount and proof of the coverage provided to the assistance eligible individuals. individuals Proof of each assistance eligible individual’s eligibility for COBRA coverage at any time during the period from September 1, 2008, to December 31, 2009 and election of p , , , COBRA coverage. A record of the SSN’s (TIN’s) of all covered employees, the amount of the subsidy reimbursed, and whether for 1 individual or 2 or more individuals
  19. 19. GETTING STARTED Deadline for providing retroactive notice is 60 days after enactment date, or approximately April 18, 2009. Model Notices are due from the Department of Labor by March 19, 2009. Employers should be compiling lists of all of the terminated people and their qualified beneficiaries since September 1, 2008. Establish procedures for “Attestation”, Election tracking, payment certification, and to bill the eligible individuals the 35% of the premiums they elect as well as other methods/practices to report the eligible individuals to the IRS as required.
  20. 20. END OF SUBSIDY When Will the Subsidy End?: When the individual becomes eligible for alternative coverage. (How will we know?) The individuals nine months ends. The individual’s COBRA coverage ends.
  21. 21. WATCH OUT Watch out for wrong or mis-leading information! Anything published or distributed before February 17 17, 2009 is likely to be wrong and/or incomplete. Discard any materials that you have with prior dates. Examples- E l Over 55 - 10 year eligibility provision did not make it. Re-opening claims back to September 1, 2008 is not part of the new law Subsidy is 65% for 9 Months ; NOT 50%/12 or 60%/12
  22. 22. PENALTIES Employers failing to comply are subject to the same COBRA penalties f lti for non-compliance as li before $110 per day per individual up to $220 per day. y COBRA participants eligible for the subsidy are subject to a 110% penalty if they become eligible for alternative coverage or Medicare and fail to notify the employer or administrator. py
  23. 23. SUMMARY The ARRA was enacted February 17, 2009. It has been 14 days since the ARRA was signed into Law. We all have until April 19 to get it together, and get the th new notices ( hi h h ti (which have not b t been written yet) i itt t) in the mail.
  24. 24. QUESTIONS Mike has been compiling some questions as you have submitted them, let’s review some now to attempt to provide some answers to your questions. Thank you for taking time to join us today. We want to thank The Detroit Regional Chamber of Commerce. For more information, contact us on line at As a Special Promotion, anyone who attends today’s Webinar can receive a FREE Subscription to check your email for details!