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The new COBRA fired employee health insurance subsidy
March 02, 2009
Tucked into the recently-enacted stimulus bill is a new 65% subsidy for health insurance premiums of terminated employees. It applies to employees who were involuntarily terminated From September 2008 through December 2009, for up to nine months. Some basics:
- The employee has to pay the remaining 35% of the premium.
- The employer then remits the full premium to the carrier.
- Employers get a credit on their federal payroll tax returns for the 65% share not paid by the employee.
The IRS describes it this way:
Under the American Recovery and Reinvestment Act of 2009, certain individuals who are eligible for COBRA continuation health coverage, or similar coverage under State law, may receive a subsidy for 65 percent of the premium. These individuals are required to pay only 35 percent of the premium. The employer may recover the subsidy provided to assistance-eligible individuals by taking the subsidy amount as a credit on its quarterly employment tax return. The employer may provide the subsidy — and take the credit on its employment tax return — only after it has received the 35 percent premium payment from the individual.
BenefitsBlog has a great roundup of resources on this new employer mandate.
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