Hello, I'm Jean Wetzler and I'm talking with John Tuzynski about COBRA.
Hi John, I have read a little about the COBRA provisions in the law, and I see the terms "COBRA subsidy" and "COBRA continuation" a lot.
What's the difference, and can you tell us what COBRA stands for?
I am glad you asked that.
Let me start out by saying that COBRA --C-O-B-R-A -- stands for Consolidated Omnibus Budget Reconciliation Act.
Congress enacted COBRA in 1985 to provide people with the opportunity to extend their health care coverage when they would have otherwise lost it, due to events like reduced work hours, job termination, divorce, or a spouse's death.
Since enactment of COBRA in 1985, the covered individual has been responsible for 100 percent of the total cost of insurance premiums due.
What's new and different beginning in 2009 is the COBRA subsidy - a provision in The American Recovery and Reinvestment Act, or A-R-R-A enacted on February 17, 2009.
This Act provides for a government subsidy for a portion of the COBRA health insurance premiums.
Who will qualify for the subsidy and how does it work?
Workers who are involuntarily terminated between September 1, 2021 and December 31, 2021 qualify for the subsidy.
This is different from regular COBRA, which applies to employees who were voluntarily or involuntarily terminated.
Now under the subsidy, the worker must pay 35% of the cost of the premium to their former employer, and the employer pays the balance.
ARRA subsidizes the employer's cost of the premium for up to nine months.
A worker is no longer eligible for the subsidy if they begin a new job with employer-sponsored health care coverage, or they become eligible for Medicare.
How does the employer claim the subsidy?
The employer claims the subsidy on the Form 941, Employer's QUARTERLY Federal Tax Return, beginning with the 941 due in April, 2009.
The credit is subject to verification, so the employer should keep good records to substantiate the claim.
That substantiation should include:
1) proof of the involuntary termination,
2) receipts for the employee's 35% of the premium,
3) verification of payment for the insurance coverage,
4) the invoice or other documentation from the insurance company verifying the nature of the payments
5) proof of each individuals eligibility for COBRA coverage
6) a record for each employee that includes their SSN, the amount of their subsidy and how many individuals their premiums covered.
I see there is a lot to the COBRA subsidy.
Where can our viewers go for more information?
Information about the COBRA subsidy and other ARRA provisions is on our Web site, and we continue to update the site as details become available.
Look for a banner on IRS.gov that leads directly to our ARRA pages and click on "COBRA coverage".
Or you can just type "COBRA" in the search box from any IRS.gov page.
The Department of Labor also has a lot of helpful information about the subsidy, and about the COBRA continuation coverage in general.
Thank you, John.
I've been talking with John Tuzynski of the IRS.
This is Jean Wetzler.
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