This page contains the first steps an employer needs to follow in order to comply with the new COBRA requirements set forth by the American Recovery and Reinvestment Act of 2009 (ARRA), signed into law by President Obama on February 17, 2009.
Step 1: Determine if you are subject to Cal COBRA or Federal COBRA
How many employees did you have in 2008? ____
(use the average number of employees you had for at least 6 months of last year)
- Less than 20 employees: You are subject to Cal COBRA
- More than 20 employees: You are subject to Federal COBRA if you had 20 or more full-time, or a combination of full-time and part time employees (whether enrolled on the plan or not), where part-time employees are counted on a pro-rated basis
Step 2: Make a list of all employees terminated since September 1, 2008
All Employers create a list including:
- Name
- Home Address
- Date of Termination
- Dependents on plan
- Coverage at time of Termination
- Reason for termination (Voluntary / Involuntary)
Employers subject to Federal COBRA must also include
- Former employee’s Fed COBRA premium amount
Step 3: How to use your List
Employers subject to Cal COBRA:
- Keep your list for your files. (specific action still pending clarification)
- Your insurance carrier may require you to provide this list to them if they are going to contact your former employees.
- If your carrier does NOT require the list from you, then you may be responsible for mailing out the Alternative Notice.
Employers subject to Federal COBRA:
- Customized the attached sample letters - See Department of Labor Examples
- Model General Notice
- Model Notice in Connection with Extended Election Periods
- Mail the letters
- Letter 1 - General Notice (full version) to all employees terminated between September 1, 2008 and December 31, 2009 who have not yet elected COBRA
- Letter 2 - General Notice (abbreviated version) to all employees terminated between September 1, 2008 and today who have already elected COBRA
- Letter 3 - Notice in Connection with Extended Election Periods to all employees terminated between September 1, 2008 and today
Note: Letters 2 and 3 will not be required for employees terminated in the future
Example: ABC Company had 28 employees last year. (Thus, they are subject to Federal COBRA.) 3 employees were involuntarily terminated in December 2008.
One employee, Sam, elected Federal COBRA.
2 employees, Mary and Joe, did not elect Federal COBRA.
Therefore, ABC Company needs to send the following:
- Sam (Letters 2 and 3)
- Mary & Joe (Letters 1 and 3)
Later on in May 2009, ABC Company involuntarily terminates another employee named George. Then, ABC Company would need to send George (Letter 1) in addition to the normal COBRA notifications.
Frequently Asked Questions (FAQs)
Who pays the 65% Subsidy?
- For Employers subject to Cal COBRA: the insurance carrier will be responsible
- For Employers subject to Federal COBRA: the employer will be responsible for providing the 65% subsidy
How do we, the employer, get the subsidy money back?
For Employers subject to Federal COBRA: the amount paid as subsidized premium is to be claimed on the Amended Form 941 as a deduction from payroll taxes. Should a company pay more in subsidized premiums than they have payroll taxes the government will reimburse them in the form of a tax refund.
Other useful sources of information are COBRAAid (COBRAaid.com), Ceridian (Ceridian.com), and Advanced Benefits (advancedbenefitconsulting.com). The first two specialize in COBRA Compliance, the latter in HIPAA Compliance. Department of Labor: http://www.dol.gov/ebsa/COBRAmodelnotice.html
If you need any counseling on your employee benefits regulations, laws or compliance contact us immediately at 619-668-5200 or email info@teaguefs.com.
