Cobra Stimulus

The COBRA subsidy provision of the American Recovery and Reinvestment Act (ARRA) provides a 65% federal government subsidy of COBRA continuation coverage premiums for involuntarily terminated employees.  While this subsidy is effective March 1, 2009, employees may be eligible if involuntarily terminated between September 1, 2008 and December 31, 2009.

What does this mean to you?

If involuntarily terminated employees elect to participate in COBRA and pay 35% of the COBRA premium you are now required to pay the remaining 65%.  You will be reimbursed for the full 65% as a credit against your federal payroll taxes. This provision requires that you inform all eligible employees of the 65% subsidy even if they previously rejected COBRA coverage at the time of termination. ProPayroll recommends that you consult your attorney or 3rd party COBRA administrator if you have specific questions about which employees are eligible or your additional responsibilities within this provision.

You can also use the following link to view frequently asked questions and answers provided by the IRS about the COBRA subsidy provision of the ARRA; www.propayroll.com/docs/cobraFAQ.pdf