How the Stimulus Plan Affects Human Resources and COBRA

Impact of Expansion of COBRA on HR, Human Resources - Implications of American Recovery & Reinvestment Act

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• » Cobra Coverage Expansion
• » Labor Law Changes
• » Tax Withholding Information
• » Impact on the United States Construction Industry
• » Cobra Continuation Health Coverage FAQs

Additional Resources

» New 941 Form

» New 941 Instructions

» COBRA Model Notice

» The American Recovery and Reinvestment Act of 2009

» View Medcom's Presentation of the American Recovery & Reinvestment Act under COBRA

Update to the American Recovery and Reinvestment Act of 2009 (December 19th, 2009)

The American Recovery and Reinvestment Act of 2009 (ARRA), as amended on December 19, 2009 by the Department of Defense Appropriations Act, 2010 (2010 DOD Act) provides for premium reductions for health benefits under the Consolidated Omnibus Budget Reconciliation Act of 1985, commonly called COBRA. Eligible individuals pay only 35 percent of their COBRA premiums and the remaining 65 percent is reimbursed to the coverage provider through a tax credit. To qualify, individuals must experience a COBRA qualifying event that is the involuntary termination of a covered employee's employment. The involuntary termination must occur during the period that began September 1, 2008 and ends on February 28, 2010. The premium reduction applies to periods of health coverage that began on or after February 17, 2009 and lasts for up to 15 months.

» Read More About the Recent Changes to COBRA

The American Recovery and Reinvestment Act of 2009

The American Recovery and Reinvestment Act, signed into law by President Obama on February 17, 2009, is a $787 billion stimulus bill. One of the many provisions of the bill is to directly provide relief to millions on the COBRA plan or ex-employees who need COBRA coverage. This "COBRA stimulus plan" will provide enrollees a COBRA premium subsidy along with providing COBRA benefits to ex-employees who denied coverage.

» Read the American Recovery and Reinvestment Act of 2009

First, Let's Look at What COBRA Is

Before we learn more about the COBRA stimulus plan, let's start with explaining a bit about COBRA. The Consolidated Omnibus Budget Reconciliation Act, otherwise known as COBRA, was put into law in 1985 to help workers who lost their job continue their health insurance. Basically, it gave the ex-employee the ability to continue their employer sponsored health insurance plan. The insurance stayed the same but the entire premium was to be paid by the ex-employee.

The First Part of The COBRA Stimulus Plan: Reduced Premiums

The COBRA stimulus plan basically has two parts. In the first part, The COBRA stimulus plan will be able to step in and help struggling families trying to pay their COBRA benefits. People who are currently enrolled in the COBRA plan will get a 65% reduction in their premium costs. This will be a huge savings to many families struggling to keep their COBRA benefits.

Part 2: The Ability to Re-Enroll into COBRA

The second part of the COBRA stimulus plan will provide recently unemployed people the ability to re-enroll into the COBRA plan, even if they had denied coverage in the past. This will help a great amount of people who choose not to continue their health insurance through COBRA because they just could not afford it.

9 Key Details about the Cobra Stimulus Plan

1. Valid for people who were involuntarily terminated between September 1, 2008 and December 31, 2009
2. To be eligible annual income cannot exceed $125,000 for a single person and $250,000 for a couples
3. 65% of existing COBRA premiums will be subsidized by the U.S. Treasury Department
4. Subsidies will be available for up to 9 months
5. If you declined COBRA coverage after September 1, 2008 you will have the option to re-enroll into COBRA with the above subsides
6. Notices of the COBRA subsidies and re-enrollment information will be sent from the COBRA administrator (usually your previous employer)
7. Subsidies will be paid, via a refundable tax credit, directly to the COBRA administrators
8. Subsidies will terminate if the enrollee acquires a new health insurance plan through another employer or is eligible for Medicare
9. Subsidies will only apply to COBRA premiums paid after the effective date of February 17, 2009 and there will be no refund of premiums prior to this date

The Stimulus Bill Does have an Impact on your Company!

Dresser & Associates is dedicated to the continuing professional success of our Abra customers. One way we do this is by keeping our Abra customers up to date on the latest issues that might impact their organization and what resources are available to them.

Below you will find articles, discussions and resources that outline the impact the Stimulus Bill (The American Recovery and Reinvestment Act of 2009) will have on HR and your company. We have also provided information regarding what you need to do to comply with the new legislation and what you need to do to minimize any financial impact.

Discussions and Resources About the Impact of the Stimulus Bill

Cobra Coverage Expansion

The American Recovery and Reinvestment Act of 2009 (ARRA), the financial stimulus law signed by President Barack Obama on Feb. 17, 2009, includes significant changes to the COBRA continuation coverage rules. In general, the ARRA:

• Provides a federal government subsidy of COBRA continuation coverage premiums for a maximum of nine months for certain individuals who are COBRA qualified beneficiaries because of a covered employee's involuntary termination of employment.
• Extends COBRA continuation coverage periods for certain individuals receiving Trade Adjustment Assistance benefits or pension benefits from the Pension Benefit Guaranty Corp.

Plan administrators of group health care plans subject to COBRA need to act quickly to:

• Implement administrative procedures necessary to provide the subsidy.
• Provide notices required by the ARRA to COBRA qualified beneficiaries who are eligible for the subsidy.
• Implement the extended COBRA coverage periods.

In addition, group health plan documents will need to be amended to incorporate these changes.

Affects on Employers and Human Resources Professionals - Labor Law Changes

A few areas that will affect Human Resources:

• E-Verify - All provisions for E-Verify were removed from the final version of the Bill.
• Unemployment and Health Care Coverage - A nine month extension of a program that offers an additional seven weeks of unemployment benefits.
• Health Care Technology - Almost $20 billion will be spent to improve the nations health care information technology.
• Trade Protection for Jobs - A provision was added that would extend Trade Adjustment Assistance benefits for at least 160,000 more workers who lose their jobs because of increased imports or because workers move those jobs offshore.
• Executive Compensation - A controversial provision limits compensation packages for businesses receiving TARP funds can offer their executive teams.

There are sure to be more areas of the 1,100 page bill that will impact Human Resources but these will have the most immediate effect. Background screening companies were looking forward to the E-Verify provision as it allows us to enhance our automated I-9 Services. The program is still available but voluntary for much of the country.

Tax Withholding Information

On February 17, 2009, President Barack Obama signed the "American Recovery and Reinvestment Act of 2009" into law. The centerpiece of this legislation, which is aimed at jump-starting the American economy, is a $400 individual "Making Work Pay" income tax credit ($800 for joint filers) for 2009 and 2010 that will be distributed through reduced withholding from workers' paychecks. This and other provisions of interest to payroll professionals are itemized below.

• Making Work Pay income tax credit
• COBRA premium subsidies to come from payroll taxes
• Parity for mass transit fringe benefits
• Child support matching funds for states
• Earned Income Tax Credit
• Delay of withholding tax on government contractors
• Suspension of tax on UC
• Work Opportunity Tax Credit expansion

» Read More | Top of Page

Impact on the United States Construction Industry

The bottom line is that the national and global economic downturn is worsening and there is very little evidence that private sector spending alone can reverse the downward spiral. In response to the economic emergency, the Obama administration and the newly convened 111th Congress are collaborating on an $825 to $880 billion economic stimulus package called the American Recovery and Reinvestment Act (H.R. 1/S. 1). Two-thirds of the legislation's spending will be dedicated to direct spending in the form of public works, energy infrastructure, social spending, broadband deployment, and health information technology. The remaining one-third will be dedicated to individual tax cuts and business tax incentives.

Cobra Continuation Health Coverage FAQs

Do You Have Questions About Cobra and The American Recovery and Reinvestment Act?

• What is COBRA continuation health coverage?
• What does COBRA do?
• Which employers are required to offer COBRA coverage?
• Who is entitled to benefits under COBRA?
• And More

» Contact Us today to take advantage of one of the great discussion offerings.