The American Recovery and Reinvestment Act of 2009 (ARRA) came into effect on February 17, 2009. This act provides premium reductions and additional election opportunities for health benefits.
It allows employees involuntarily terminated from their employment to continue health care coverage for up to 18 months.
Effective February 17, 2009 employees under COBRA will pay only 35% of the monthly premium for health insurance. This benefit will last for 9 months from the first month the employee takes advantage of the plan.
Employees terminated between September 1, 2008 and December 31, 2009 are eligible for these benefits, even those who did not elect COBRA at the time of termination.
Employers will be responsible for the remaining 65%. They will be able to deduct this amount from their federal payroll tax liability.
If the employer has fewer than 20 employees, the 65% will be covered elsewhere. In the state of New Jersey it will be covered by the insurance company. Each state will release its own method of covering the 65% for employers with fewer than 20 employees. Not all states have released this information.
The IRS has changed the payroll tax return form 941 to reflect these changes.
USA Payroll® has updated their system to reflect these changes in compliance with the new act.
Any client with COBRA should communicate with their payroll specialist on this matter.
For more information, please see:
- Internal Revenue Service
http://www.irs.gov/newsroom/article/0,,id=204505,00.html - U.S. Department of Labor
http://www.dol.gov/ebsa/cobra.html