COBRA Articles

As of Aug. 31, 2011, all workers exhausted the COBRA subsidy benefit allowed by the American Reinvestment and Recovery Act (ARRA). Now, you need to claim your ARRA tax credits and keep participants informed. Here are three tips to help with the transition:

• Report ARRA credits. Until now, eligible employees paid 35 percent of their COBRA premium and the remaining 65 percent was reimbursed to the employer through a tax credit. Use the updated Form 941, Employers Quarterly Federal Tax Return, to claim your COBRA premium assistance payments. Accurate reporting is critical – make sure to double-check the list of active participants and maintain good documentation. Keep copies of your 941 forms and COBRA notification documents for six years to be compliant with COBRA documentation requirements. You have up to one year to report any filing errors using the 941X form.

• Notify participants of premium changes. With the end of the ARRA period, participants are responsible for the ENTIRE portion of the COBRA premium. That means those who had a qualifying event May 2010, should pay 100 percent of the premium on Sept. 1. Make sure to keep their participants informed so there are no surprises.

• Watch for underpayments. Be aware that carriers often cancel coverage for underpayment, and the chance of underpayments may be higher than usual this month with ARRA expiring. Proactively communicate with participants and carriers to avoid any unintended cancelations.

In many states, there are new COBRA requirements impacting employers with fewer than 20 employees. In addition to complying with federal COBRA compliance requirements, all employers need to be aware of their state COBRA compliance requirements, often known as “mini-COBRA” laws. While federal COBRA compliance laws apply to employers with 20 or more employees, mini-COBRA applies to employees of firms with fewer than 20 workers who would not otherwise be covered by federal COBRA. Eligibility rules, rates, and the duration of benefits allowed are often different than those dictated by federal COBRA. As of January 2010, more than 40 states had mini-COBRA laws in effect.

If you are a COBRAAnswers subscriber, you can find a summary of your state’s continuation laws online. Just log in to COBRAAnswers, select “Guides,” “COBRA Handbook” and then click “State Continuation Coverage Laws.”

Colonial Life & Accident Insurance Company surveyed more than 750 HR managers and benefits administrators at the July annual conference of the Society for Human Resource Management. Fifty-one percent of the HR managers predicted that employees’ health insurance premiums would go up, while nearly as many (49 percent) thought employees’ health insurance deductibles and/or copayments would also increase. Source: http://www.coloniallife.com.

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