The document provides information about changes to COBRA coverage and subsidies under the American Recovery and Reinvestment Act of 2009. It summarizes that the Act provides a 65% government subsidy for COBRA health coverage for qualified individuals for up to 9 months. It outlines eligibility criteria for the subsidy and requirements for employers, such as providing notices about the availability of the subsidy to eligible former employees. Employers can receive reimbursement of subsidies paid through reductions in their federal payroll taxes.

1. Caring People. Shaping Futures.™
Legislative Update
Changes to COBRA under the
American Recovery and
Reinvestment Act
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2. Welcome Caring People. Shaping Futures.™
• 2009 Legislative Outlook
• Quarterly Legislative Webinars
– Email newsletters@bcgcompany.com with your contact info to
join our communication list.
• CPE Requests email jennifer.hertzig@bcgcompany.com
• Introduction of the Presenters
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3. Caring People. Shaping Futures.™
COBRA provisions under the
American Recovery &
Reinvestment Act
Enacted February 17, 2009
Effective March 1, 2009
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4. Topics Caring People. Shaping Futures.™
• What Health Coverages are Affected?
• The COBRA Subsidy - Who is eligible? Length of
coverage?
• The Second Chance COBRA Election Period
• Action Steps
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5. Overview Caring People. Shaping Futures.™
• The objective of the COBRA provisions of The Act is to
provide a 65% government subsidy to qualified
individuals for COBRA coverage for a limited period of
time.
• The provisions impose a number of complex
administrative requirements on employers,
administrators and insurers.
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6. Who is Eligible for the Subsidy? Caring People. Shaping Futures.™
• Any employee or dependent who loses coverage
under a group health plan (a “Qualified Beneficiary”)
is eligible for a COBRA subsidy if they are entitled to
COBRA as a result of the employee’s involuntary
termination of employment during the period
beginning September 1, 2008 and ending December
31, 2009.
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7. What does “involuntary” mean? Caring People. Shaping Futures.™
• Laid off, downsized, fired: YES
• Quit, retired, leave of absence: NO
• The determining factor is: who initiated the
termination – the employer or the employee?
• Further guidance is likely to be issued by the Treasury
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8. What Health Coverage Is Affected? Caring People. Shaping Futures.™
• All coverages ordinarily subject to federal COBRA law
and any state “mini-COBRA” laws (i.e., state
continuation laws applicable to employers with fewer
than 20 employees).
• Fully insured and self-insured plans
Note – the subsidy is not available for Health FSA
coverage
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9. The 65% Subsidy – Effective Date Caring People. Shaping Futures.™
• The subsidy begins with the Qualified Beneficiary's
premium payment for the first period of coverage
following enactment (March 1 or later).
• Neither the coverage nor the subsidy is retroactive to
the date of termination.
• The subsidy is available for up to nine months of
coverage.
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10. Losing eligibility for the subsidy Caring People. Shaping Futures.™
1. Becoming eligible for coverage under another group
health plan or Medicare.
 For this purpose, “group health plan” does not include a
plan that provides only limited benefits, such as dental
care, vision care, EAP, FSA, etc.
 Coverage under a spouse’s plan will also disqualify the
subsidy.
 The QB is responsible for notifying the plan when other
coverage becomes available, will be liable for 110%
penalty.
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11. Losing eligibility for the subsidy Caring People. Shaping Futures.™
2. The subsidy starts to become taxable income when
the QB’s AGI exceeds $125k (single) or $250k (joint
return)
 Fully taxable if earn more than 145k/290k
 The recapture will occur when they file their tax
return (so the employer is not responsible for
monitoring this)
 To avoid this recapture, individuals can
permanently waive their right to the subsidy
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12. Losing eligibility for the subsidy Caring People. Shaping Futures.™
3. When COBRA ends in accordance with standard COBRA
rules
 The coverage period expires (generally after 18
months)
 The QB fails to pay premiums
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13. Who Pays What? Caring People. Shaping Futures.™
• The COBRA participant pays 35% of the required
COBRA premium. (See next slide.)
• The employer will still pay the full cost of the
coverage to the insurance carrier as usual.
• The employer is reimbursed the 65% subsidy by the
government in the form of a reduction in their
Federal payroll taxes. (Jessica will cover in further
detail)
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14. What if … Caring People. Shaping Futures.™
… the employer pays part of the premium?
CAUTION:
The Act contains specific language that states if the QB’s
required premium is something less than the actual cost
of the plan, then the QB’s 35% is based on that
“required premium”.
Therefore the employer’s 65% subsidy rebate is
similarly limited to the lower required premium.
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15. What if … Caring People. Shaping Futures.™
… the employer pays part of the premium?
Say the employer agrees to pay 50% of the $1000
premium for 6 months in a severance agreement for a
terminating employee.
• Since the employee is only required to pay $500 for his
coverage, under the Act he would only have to pay
$175 (35% of $500).
• The employer would only be entitled to a credit of
$325(65% of $500) for this employee’s coverage, vs.
the full $650 if the employee had been required to pay
the entire premium.
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16. Offering COBRA with the Subsidy Caring People. Shaping Futures.™
There are two types of Qualified Beneficiaries who
would be offered COBRA with the 65% subsidy:
1. “First Chance QBs” are those who lose coverage by
termination after 2/17/09.
 Election notice must be provided in accordance
with regular COBRA notice requirements (within 45
day of event)
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17. Offering COBRA with the Subsidy Caring People. Shaping Futures.™
2. “Second Chance QBs” who experienced the triggering
event between 9/1/08 and 2/16/09
 Must be offered to eligible QBs who originally
declined COBRA coverage and to eligible QBs who
elected and subsequently terminated COBRA
coverage.
 The Notice must be sent within 60 days of
enactment (by 4/18/09).
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18. Second Chance Enrollees Caring People. Shaping Futures.™
• Coverage will commence with the first coverage period
beginning after enactment (usually March 1).
• Coverage will end on the date coverage would
otherwise have ended if the QB had timely elected
COBRA coverage following the QB’s termination of
employment (usually 18 months after coverage was
lost).
• Example: Termination & loss of coverage was October
1, 2008 Second chance COBRA election & coverage
effective March 1, 2009. COBRA coverage ends March
31, 2010 – 18 months after loss of coverage.
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19. Second Chance Enrollees Caring People. Shaping Futures.™
… thus, second-chance QBs do not have to elect and
pay premiums retroactive to the loss of coverage. They
can and will have a gap in coverage.
Special HIPAA rule: In this case, the period of time
beginning with the qualifying event and ending on
3/1/09 will not be counted as a break in coverage for
purposes of the 63-day pre-existing condition rule.
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20. Employer’s Action Plan Caring People. Shaping Futures.™
Identify all AEIs currently on COBRA
These are individuals who are QBs based on
involuntary termination of covered employee's
employment on or after September 1, 2008, who
were eligible for COBRA coverage on or after
September 1, 2008, who have elected COBRA
coverage and whose COBRA election is currently in
effect.
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21. Employer’s Action Plan Caring People. Shaping Futures.™
Identify all other QBs
• Who are or were eligible for COBRA by virtue of any
other Qualifying event between 9/1/08, and 2/16/09,
who have not elected COBRA as of 2/17/09 or who
elected but lost coverage. This includes spouses and
children who were covered at the time of the
qualifying event but are not covered now.
– they must receive a notice of the availability of the
premium subsidy (EVEN THOUGH THEY ARE NOT
ELIGIBLE).
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22. Action Plan Caring People. Shaping Futures.™
• Determine if you wish to wait on model notices or
draft notices independently.
• Revise election notices if you choose not to wait on
model notices.
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23. Action Plan Caring People. Shaping Futures.™
• Draft a Subsidy waiver form for highly compensated
employees and an “attestation of eligibility” form for
all individuals who will be entitled to the premium
assistance.
• Revise HIPAA certificates of creditable coverage for
those who take advantage of the special election
period to reflect the fact that any gap between the
date of the qualifying event and the date coverage
begins is not considered a “gap” in coverage for
purposes of HIPAA’s pre-existing condition rules.
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24. Action Plan Caring People. Shaping Futures.™
• Develop a procedure for QBs who pay more than 35%
during the first two months – will you refund the
excess or credit it against future premiums?
• Calculate the new premium structure to determine
the employee’s 35% portion, and the amount of
subsidy available through payroll offset. Additional
guidance will be issued in the future regarding this
process.
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25. Action Plan Caring People. Shaping Futures.™
• Review your plan documents, SPDs and related
communication materials (e.g., online summaries) to
determine what (if any) changes are necessary due to
the Act.
• Find out from your payroll administrator how they can
help you track and maintain the payroll information
necessary to fulfill your notice obligations (amount of
payroll taxes offset by the Subsidy, etc.).
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26. Action Plan Caring People. Shaping Futures.™
• Implement a procedure to send out notices when the
premium assistance is about to be exhausted.
Employers should notify QBs in advance of their
COBRA premium increase after the subsidy runs out.
For example, such notice would be provided when the
maximum nine month premium assistance period
ends, or if the QB becomes eligible for other coverage
under a group health plan or Medicare.
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27. Caring People. Shaping Futures.™
Payroll Tax Advisement
Jessica Szydlowski
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28. Employer Reimbursement Caring People. Shaping Futures.™
• The employer must pay the premium in order to be
eligible for the credit.
• The employer must receive the employee’s 35%
portion of the premium.
• Employers can offset payroll tax deposits or claim
the amount on their quarterly filing of Form 941.
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29. Employer Reimbursement Caring People. Shaping Futures.™
Changes to Form 941
• 12a COBRA premium assistance payments
• 12b Number of individuals provided COBRA
premium assistance reported on line 12a
Visit www.bcgcompany.com for instructions and a copy
of Form 941
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30. Employer Reimbursement Caring People. Shaping Futures.™
What happens if the payment results in an
overpayment of your payroll taxes?
• Credit applied to next quarter
• Overpayment can be refunded
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31. Employer Reimbursement Caring People. Shaping Futures.™
Required Supporting Documentation
• Receipt of employees’ 35% payment
• Copy of the invoice from the insurance carrier
• Declaration of employee’s involuntary termination
• Proof of eligibility for COBRA coverage
• A record of the employee’s SSN and how many
individuals this subsidy covers
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32. Contact information Caring People. Shaping Futures.™
Jim Krosky, SPHR
jim.krosky@bcgcompany.com
(330) 572-8049
Jessica Szydlowski
Jessica.Szydlowski@bcgcompany.com
NEO Administration Company
330-864-0690
COBRA@FlexNEO.com
Q&A’s will be posted at www.bcgcompany.com
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