New Cobra Laws


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Overview of new COBRA regulations, including what businesses must do to comply.

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New Cobra Laws

  1. 1. THE NEW COBRA LAWS By Eric Swenson ©2009 RSJ/Swenson LLC
  2. 2. ©2009 RSJ/Swenson LLC OVERVIEW COBRA and the New ARRA Assistance Eligible Individuals (AEIs) The Subsidy – Premium Assistance Extended Election Period Notices Non-Compliance Penalities What To Do!
  3. 3. ©2009 RSJ/Swenson LLC <ul><li>THE ACT AFFECTS MOST EMPLOYERS </li></ul><ul><ul><li>Employers with group health plans subject to COBRA through Tax Code, ERISA or PHSA (Public Health Service Act): </li></ul></ul><ul><ul><ul><li>Private companies with 20 or more employees </li></ul></ul></ul><ul><ul><ul><li>State and local government employers </li></ul></ul></ul><ul><ul><ul><li>Federal government </li></ul></ul></ul><ul><ul><li>Other employers with group health plans subject to COBRA comparable coverage (such as state mini-COBRA ) </li></ul></ul>
  4. 4. ©2009 RSJ/Swenson LLC <ul><li>EFFECTIVE DATES </li></ul><ul><li>The Act became effective February 17, 2009, but applicable for any period of coverage after that date </li></ul><ul><li>Exceptions possible for shorter coverage periods </li></ul><ul><li>Special effective dates for premium subsidy eligibility </li></ul><ul><ul><li>September 1, 2008 through December 31, 2009 </li></ul></ul><ul><li>Extended COBRA election period also tied to notice </li></ul>
  5. 5. FAILURE TO COMPLY ©2009 RSJ/Swenson LLC <ul><li>Legislative history suggests violation of new notice rules is a violation of COBRA notice rules </li></ul><ul><li>ERISA attaches $110/day penalties for COBRA notice violations </li></ul><ul><li>Tax Code $100/day excise tax for COBRA violations </li></ul><ul><li>Potential lawsuits under ERISA and Public Health Service Act </li></ul>
  6. 6. One Additional Chance <ul><li>The Act provides assistance eligible individuals (AEIs) another opportunity to elect COBRA </li></ul><ul><li>Additional election right does not extend to COBRA comparable coverage plans </li></ul><ul><li>Election right begins February 17, 2009 and continues for 60 days following notification </li></ul><ul><li>Election right available even if AEI did not previously elect, or prematurely ended COBRA </li></ul>©2009 RSJ/Swenson LLC
  7. 7. ©2009 RSJ/Swenson LLC <ul><li>Who is eligible for Premium Reimbursement? </li></ul><ul><li>Qualified beneficiaries are eligible for COBRA assistance if: </li></ul><ul><li>Eligible for federal or state COBRA at any time between September 1, 2008 and December 31, 2009; and </li></ul><ul><li>Elects COBRA (when first offered or during extended election </li></ul><ul><li>period); and Involuntarily terminated between September 1, 2008 and December 31, 2009 </li></ul>
  8. 8. COBRA Premium Assistance <ul><li>AEI pays only 35% of COBRA premium </li></ul><ul><li>Employer or insurer picks up remaining 65% and is later reimbursed by the federal government </li></ul><ul><li>AEI s 35% can be paid by third party, but employer payment alters benefit </li></ul><ul><li>Premium subsidy continues for up to 9 months </li></ul>©2009 RSJ/Swenson LLC
  9. 9. COBRA Premium Assistance <ul><li>Subsidy begins on first day of first month of the period of coverage beginning on or after February 17, 2009 </li></ul><ul><li>Subsidy ends on the earliest of: </li></ul><ul><ul><li>9 months after the first day of the first month of coverage </li></ul></ul><ul><ul><li>The date following expiration of the maximum COBRA coverage period </li></ul></ul><ul><li>If the individual becomes eligible for coverage under other group health plan, subsidy ends. </li></ul>©2009 RSJ/Swenson LLC
  10. 10. ©2009 RSJ/Swenson LLC <ul><li>Income Limits Apply </li></ul><ul><li>If taxpayers income exceeds $145,000 ($290,000 for joint taxpayers), then amount of premium reduction must be repaid. </li></ul><ul><li>High-income individuals can waive assistance </li></ul>
  11. 11. ©2009 RSJ/Swenson LLC <ul><li>PROVIDING NOTICES – INCLUDE THIS INFORMATION: </li></ul><ul><li>The forms necessary for establishing eligibility for the premium reduction; </li></ul><ul><li>Contact information for the plan administrator or other person maintaining relevant information in connection with the premium reduction; </li></ul><ul><li>A description of the second election period (if applicable to the individual); </li></ul><ul><li>A description of the requirement that the Assistance Eligible Individual notify the plan when he/she becomes eligible for coverage under another group health plan or Medicare and the penalty for failing to do so; </li></ul><ul><li>A description of the right to receive the premium reduction and the conditions for entitlement; and </li></ul><ul><li>If offered by the employer, a description of the option to enroll in a different coverage option available under the plan. </li></ul>
  12. 12. ©2009 RSJ/Swenson LLC <ul><li>WHAT TO DO IF YOU ARE AN AFFECTED EMPLOYER </li></ul><ul><li>Determine eligible qualified beneficiaries </li></ul><ul><li>Satisfy new notice requirements </li></ul><ul><li>Establish administrative procedures for 65% premium subsidy </li></ul><ul><li>Establish administrative procedures for federal reimbursement </li></ul><ul><li>Additional guidance can be found at: </li></ul><ul><li> </li></ul>
  13. 13. ©2009 RSJ/Swenson LLC YOUR BUSINESS RESOURCE 818.461.1874 702.688.4002