Stimulus Package’s COBRA Subsidy: Guidance Update

The American Recovery and Reinvestment Act of 2009 (ARRA) provides certain employees the opportunity to collect a subsidy equal to 65% of COBRA continuation premiums for themselves and their families for up to 9 months.  We’ve posted about the new COBRA subsidy previously and those posts contain important details on how the subsidy affects employers.  Here it is, though, in a nutshell:

Workers who have lost their jobs may qualify for a 65 percent subsidy for COBRA continuation premiums for themselves and their families for up to nine months.

Eligible workers will have to pay 35 percent of the premium to their former employers.

To qualify, a worker must have been involuntarily separated between Sept. 1, 2008, and Dec. 31, 2009. Workers who lost their jobs between Sept. 1, 2008, and enactment, but failed to initially elect COBRA because it was unaffordable, get an additional 60 days to elect COBRA and receive the subsidy.

This subsidy phases out for individuals whose modified adjusted gross income exceeds $125,000, or $250,000 for those filing joint returns. Taxpayers with modified adjusted gross income exceeding $145,000, or $290,000 for those filing joint returns, do not qualify for the subsidy.

The IRS and U.S. Department of Labor have posted several helpful documents recently.  We’ve packaged them for you in one nice little PDF Portfolio for your easy reference.

Included in the package are the following:

  • IRS Revised Form 941 (Employers Quarterly Federal Tax Return)
  • IRS Instructions for Revised Form 941
  • DOL FAQ and Fact Sheet
  • DOL Flyer for Employers

For our previous posts, see:

Guidance for Employers on the New COBRA Subsidy

Stimulus Package Provides for Employee Whistleblower Protection

American Recovery & Reinvestment Act Provides Tax Benefits for Some Employers

Governors Reject Stimulus Funds Marked for Expanding Unemployment Benefits

More Employer Compliance Issues from Stimulus Package

Stimulus’ COBRA Premium Subsidy Puts Burden on Employers

Contact Information