Advice for employers trying to comply with the Obama COBRA subsidy

If you’re an employer with 20 or more employees and you’re wondering how to comply with the COBRA subsidy in the Obama Stimulus Plan, here’s some helpful information. On February 17th, President Obama signed the American Recovery and Reinvestment Act of 2009 (HR 1) to help stimulate the US economy. A major component of this new law created temporary changes in COBRA and the employer’s obligation under COBRA. I have spoken with many COBRA administrators (Conexis, Infinisource, etc.) and they are working feverishly to send out instructions for employers. They should send you something by the second week of March 2009. The new Federal law became effective March 1st and plan employers have until April 17th to notify eligible COBRA beneficiaries of the changes. As of March 2nd, here is the latest information about this issue:

1) I have written a short summary of the COBRA Stimulus Package changes in this blog post.

2) The US Department of Labor sets policy for COBRA and here is their guidance info on COBRA and the Stimulus Package Also, I found their “COBRA Premium Reduction Fact Sheet” helpful.

3) The IRS has sent out some guidance explaining how employers can recoup the premium that they pay on behalf of eligible COBRA beneficiaries .

All of this is happening very quickly and this impacts every company in the United States with 20 or more employees. DOL and the IRS are trying to figure out what to tell people in order to comply and how to adjust their automated payroll tax collection system. The COBRA administrative companies (Conexis, Infinisource, etc.) are trying to figure out what to tell their clients. Payroll companies (ADP, Paychex, etc.) are trying to figure out how to change their systems to integrate the credit on the 941 forms.

I recommend that employers wait to hear from their COBRA administrators. If you administer COBRA yourself, then I recommend that you call your insurance company or broker. You must send out special notices. Hopefully DOL will create these notices. Also, at this time you may want to identify COBRA eligible employees who have been involuntarily terminated from employment since September 1, 2008. It is my understanding that the companies that administer COBRA will send out all of the required notices to the COBRA beneficiaries on behalf of their clients.

Feel free to contact us if you have questions.