Under the American Recovery and Reinvestment Act of 2009, the federal government pays 65% of the premiums for employees terminated on or after September 1, 2008, and before January 1, 2010, for those with coverage under COBRA. (Federal COBRA applies to employers with 20 or more employees that maintain group health plans; “mini” COBRA in a number of states may apply to employers with as few as two employees.) Now, the Department of Defense Appropriations Act 2010 extends the federal subsidy in two ways:
- It applies to workers laid off through February 28, 2010;
- It extends the subsidy period from the current nine months to 15 months.
- Providing notice to current and future COBRA beneficiaries about the new 15-month subsidy period.
- Determining whether any employees who leave your company in January or February have been “terminated” and are eligible for this COBRA subsidy.
- Compensating former employees who overpaid their premiums for December because they thought they were no longer eligible for a subsidy. You can issue them a refund check or offset their future COBRA premiums by the overpayment.
- Continuing dealing with the federal subsidy for the extended period. This means laying out the full premiums and then recouping the subsidy portion on the quarterly Form 941. The IRS has provided questions and answers on this subject; they have not as yet been updated to reflect the new extension for the subsidy.