The American Recovery and Reinvestment Act of 2009
The American Recovery and Reinvestment Act of 2009 (ARRA) was passed in February of 2009 and it affects COBRA recordkeeping. As a result, HRSource has been modified to accommodate ARRA as described below.
Background
ARRA provides for premium reductions and additional election opportunities for health benefits under the Consolidated Omnibus Budget Reconciliation Act of 1985, commonly called COBRA (generally applies to employers with 20 or more employees). Eligible individuals pay only 35 percent of their COBRA premiums and the remaining 65 percent is reimbursed to the coverage provider through a tax credit. The premium reduction applies to periods of health coverage beginning on or after February 17, 2009 and lasts for up to 15 months for those eligible for COBRA during the period beginning September 1, 2008 and ending May 31, 2010 due to an involuntary termination of employment that occurred during that period. In some cases, workers who had their hours reduced and later lose their jobs may also be eligible for the subsidy. More information is available on the Department of Labor website.
The premium reduction for COBRA continuation coverage is available to "assistance eligible individuals". An "assistance eligible individual" is the employee or a member of his/her family who:
- Is eligible for COBRA continuation coverage at any time between September 1, 2008 and May 31, 2010;
- Elects COBRA coverage; and
- Is eligible for COBRA as a result of the employee's involuntary termination between September 1, 2008 and May 31, 2010.
Those who are eligible for other group health coverage (such as a spouse's plan) or Medicare are not eligible for the premium reduction. There is no premium reduction for premiums paid for periods of coverage prior to February 17, 2009.
The premium reduction (65 percent of the full premium) is reimbursable to the employer, insurer or health plan as a credit against certain employment taxes.
Special COBRA Election Opportunity:
Individuals involuntarily terminated from September 1, 2008 through February 16, 2009 who did not elect COBRA when it was first offered OR who did elect COBRA, but are no longer enrolled (for example because they were unable to continue paying the premium) have a new election opportunity (see sample notification http://www.dol.gov/ebsa/COBRAmodelnotice.html). This election period begins on February 17, 2009 and ends 60 days after the plan provides the required notice. COBRA coverage elected in this special election period begins with the first period of coverage beginning on or after February 17, 2009.
Notice: Plan administrators must provide notice about the premium reduction to individuals who have a COBRA qualifying event during the period from September 1, 2008 through May 31, 2010 (due 60 days after February 17). Plan administrators may provide notices separately or along with notices they provide following a COBRA qualifying event. This notice must go to all individuals, whether they have COBRA coverage or not, who had a qualifying event from September 1, 2008 through May 31, 2010.
Unless specifically modified by ARRA, the existing COBRA notice manner and timing requirements continue to apply.
The state of California offers Cal-COBRA, which is like Federal COBRA. Cal-COBRA applies to employers and group health plans that cover from 2 to 19 employees. A reduction in premium is also available to people eligible for Cal-COBRA under the ARRA. Cal-COBRA is also for people who use up their Federal COBRA. When your 18 months of Federal COBRA ends, you can buy 18 more months of health insurance under Cal-COBRA. More information is available on the California Department of Managed HealthCare website.
HRSource Operation Instructions
- Provide employees who have a COBRA qualifying event with the required ARRA paperwork. Sample notifications and forms, along with additional information, are available at the U.S. Department of Labor web site: http://www.dol.gov/ebsa/COBRAmodelnotice.html
- Complete the HRSource COBRA screens as normal.
- On the COBRA Participant Actions screen enter the Reduction start date in the ARRA Reduction Start Date field.
- On the COBRA Participant Payment screen enter the amount of the ARRA subsidy in the Subsidy Amount field.
- Periodically submit a payroll tax credit*. Enter the date that the tax credit was processed on the Subsidy Credit Date field on the COBRA Participant Payment screen.
- Periodically run the query named "COBRAARRASubsidyLog" (Administration > Query & Report > Open/Run Query). You can also enter this query in the Auto Alert validation table so it will display automatically. This query displays all individuals currently eligible for COBRA or for whom outstanding tax credit is still available. The query displays the number of months ARRA subsidy months (15 maximum), the total amount of subsidy, the amount of credit taken, and the outstanding amount of credit still available.
*The payroll tax credit may be claimed by: (1) a multiemployer group health plan, (2) an employer maintaining a group health plan that is subject to Federal COBRA continuation coverage requirements or that is self-insured, or (3) an insurer providing coverage under a plan not included in (1) or (2). Only this person is eligible to offset its payroll taxes by the amount of the subsidy. The tax credit is claimed on the January 2009 revision of the IRS Form 941, Employer's Quarterly Federal Tax Return. If the credit amount is greater than the taxes due, the Secretary of the Treasury will directly reimburse the person claiming the tax credit for the excess in the same manner as if it were an overpayment of such taxes. For more information on the credit and tax provisions in the ARRA, visit the IRS web site http://www.irs.gov/newsroom/article/0,,id=204335,00.html.
HRSource Implementation
Contact Auxillium West Technical support to receive this HRSource modification:
- Email: TechSupport@auxillium.com
- Phone: 1-888-662-4937
