Consolidated Omnibus Budget Reconciliation Act (COBRA)
What is COBRA?
Congress passed the landmark
Consolidated Omnibus Budget Reconciliation Act health benefit provisions
in 1986. The law amends the Employee Retirement Income Security
Act, the Internal Revenue Code and the Public Health Service Act to
provide continuation of group health coverage that otherwise might be
terminated.
COBRA contains provisions giving
certain former employees, retirees, spouses former spouses, and
dependent children the right to temporary continuation of health
coverage at group rates. This coverage, however, is only available
when coverage is lost due to certain specific events. Group health
coverage for COBRA participants is usually more expensive than health
coverage for active employees, since usually the employer pays a part of
the premium for active employees while COBRA participants generally pay
the entire premium themselves. It is ordinarily less expensive,
though, than individual health coverage.
Employers with 20 or more
employees are usually required to offer COBRA coverage and to notify
their employees of the availability of such coverage. COBRA
applies to plans maintained by private-sector employers and sponsored by
most state and local governments.
For more information about COBRA, visit the U.S. Department of Labor (DoL) Web site.
COBRA Provisions in the American Recovery and Reinvestment Act
of 2009
The U.S. Department of Labor
(DoL) released four model notices employers need to inform former
employees of the availability of a premium subsidy for COBRA health
continuation coverage. The premium subsidy for certain former
employees was enacted as part of the Stimulus Bill signed into law by
the President on February 17, 2009. Each of the model notices is
tailored to a specific set of circumstances.
To access DoL’s press
release on this topic, go to www.dol.gov/opa/media/press/ebsa/EBSA20090292.htm.
To access the model notices, go
to the Employee Benefit Security Administration’s (EBSA) dedicated
web page at www.dol.gov/cobra.
Under the “For Employers” heading, click on the
“COBRA ARRA Model Notices” link. Please note the
availability of additional helpful information on this page as
well.
Additionally, the Internal
Revenue Service (IRS) has produced some guidance to employers on how to
manage the subsidy offsets on their quarterly tax
forms.
For IRS Q&A on the
preparation of the form, go to www.irs.gov/newsroom/article/0,,id=205373,00.html.
To access the Employer’s
Quarterly Federal Tax Return, go to www.irs.gov/pub/irs-pdf/f941.pdf.
To access Quarterly Form
instructions, go to www.irs.gov/pub/irs-pdf/i941.pdf.
The IRS has also issued a notice in a Q&A format that addresses
several issues, most notably clarifying what constitutes the involuntary
termination of an employee, a key eligibility requirement.
Download the notice at www.naw.org/files/Cobra27.pdf.
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