Employment Law Alert – Stimulus Package Adds New Employer Notification Obligations under COBRA
by Roberta S. Hayashi
February 25, 2009
The Federal economic stimulus package that has now been signed by the President includes temporary COBRA health insurance premium subsidies to employees who are involuntarily terminated between September 1, 2008 and December 31, 2009. The subsidies apply to COBRA premium payments that are made starting March 1, 2009.
Please take note of the new notification responsibilities and obligations to facilitate this benefit for your former employees, including:
- Identify employees involuntarily terminated during the period of September 1, 2008, and December 31, 2009. The COBRA subsidy will not apply to qualified beneficiaries who voluntarily terminate their employment or who are involuntarily terminated for cause that would eliminate COBRA eligibility, such as gross misconduct. Individuals with annual income exceeding $145,000 per year, and couples with annual income exceeding $290,000 per year are not eligible for the subsidy; the subsidy amount is reduced for employees with $125,000 in income ($250,000 for couples).
- Reduce the COBRA premium rate for eligible individuals and their eligible dependents by 65% (paid back to the employer by way of tax credits on the employer’s payroll tax return). Starting March 1, 2009, eligible individuals will pay 35% of the regular premium for a period of up to 9 months. Employers will be responsible for paying 65% of the premium to the insurer, and then claiming the amount paid as a credit on the employer’s payroll taxes.
- Extend the COBRA Election Period for eligible employees who did not enroll in COBRA prior to February 17, 2009, and notify these employees that they can now enroll in COBRA at reduced rates. These employees will have an additional 60 days from the date the notice is sent to enroll in COBRA. However, the COBRA eligibility period (usually 18 months) is not extended and still starts to run as of the date that coverage under the employer-provided plan ends. Any preexisting conditions that occur during the break in coverage (before February 17, 2009), shall be disregarded in determining eligibility for coverage.
- Update your COBRA Notification and Election Forms. Federal agencies are developing model notices, which should be available shortly. COBRA administrators are currently sending information out to their clients. Please note that employers are required to have new notification and election forms in place by April 18, 2009.
Attorneys in the Berliner Cohen Employment group will be pleased to provide further information regarding the matters discussed in this Alert:
Berliner Cohen’s experienced employment law attorneys advise and represent employers and managers on a full range of legal issues affecting the workplace, including harassment and discrimination, unfair competition and trade secrets, wrongful discharge, wage and hour issues, and labor disputes. Berliner Cohen is one of the largest law firms in San Jose serving the business and regulatory needs of private business and public agencies. For almost 40 years, the Firm has developed the special expertise required by a diverse client base consisting of some of Silicon Valley’s largest corporations, new ventures, leading real estate developers, cutting-edge software manufacturers, healthcare providers, mortgage banking companies, municipalities and public agencies. Berliner Cohen also meets the growing demands of the San Joaquin Valley with its expanding office in Merced.
© 2009 Berliner Cohen. This summary is for your general information and does not constitute specific legal advice. Your COBRA administrator can provide your company with more specific information.