SOURCE: Business Benefits Insurance

February 24, 2009 13:32 ET

COBRA Changes and the Stimulus Plan -- Law Cuts Employee Contribution to 35%, Many Employers Unaware, Says Business Benefits Insurance

Employers Pay Upfront, Get Tax Credit, Starting March 1

ANDOVER, MA--(Marketwire - February 24, 2009) - The new stimulus-plan law requires the government to subsidize laid-off workers on COBRA for the nine months, starting March 1, to the tune of 65% of the cost, but employers have to pay the subsidy upfront.

"Employers will get the money back, but have to give the government a short-term loan," says health-insurance expert Jim Edholm, president of Business Benefits Insurance in Andover, Mass.

"Employers have to get ready now to start administering the subsidy, which starts in less than a week," he says.

COBRA is the law that lets laid-off workers stay on their ex-employer's healthcare plan. They used to pay the entire premium out of pocket. Under the new law:

--  The employer must pay the 65% to the government and then deduct that
    as a credit against payroll and income taxes withheld from employees.
    
--  The law is retroactive to September 1, 2008, and the employer must
    reach out to both those who took COBRA at that time and to those who didn't
    take it.
    
--  There will be a special "open enrollment" for those who are eligible
    for COBRA but didn't take it.  This lets them join at 35% of the cost.
    

More details are found on Edholm's benefits blog at http://bbibenefits.wordpress.com/2009/02/17/more-details-on-stimulus-act-cobra-requirements/.

Business Benefits Insurance (www.bbibenefits.com) is an employee benefits planning firm in Andover, Mass., serving employers in Massachusetts, New Hampshire, and Maine.

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