COBRA Articles

We all thought COBRA was confusing before, but now it's reached a whole new level of pandemonium. In fact, the number one question on the Department of Labor homepage all summer was, "What is the status of the premium reduction under ARRA?"

Now that ARRA has ended, COBRA guidelines aren’t getting easier, they're getting harder. Every week, my team fields hundreds of client questions about how to manage terminations. My answer is this: Very carefully, of course. Lawmakers have been so distracted by the health bill that as of this writing, they forgot to provide guidance about how employers should proceed with COBRA administration in light of recent changes

Here's what we know: The only part of ARRA that's really over is the ability to qualify for the subsidy. Going forward, employers have to take a two-prong approach. First, they need to brush up on the old COBRA rules, which are now the post-ARRA rules. Second, they need to keep up to date on ARRA rules that apply to those who were terminated prior to May 31. Those people will fall under ARRA guidelines for 15 months, until October 2011. And, the IRS will keep files open until 2012 to accept any tax reporting changes from 2011.

For those who were terminated June 1 and later, the rules are unclear. Assuming no further legislative changes, pre-ARRA COBRA rules apply – with one major twist, the new age 26 rule. (Stay tuned for an article dedicated to this change next month.)

For now, two sets of rules apply for how to complete 941 forms, how to apply tax credits, and how to provide notice. The chart below shows some basic differences between administration requirements for the two groups.

Tips for Success

• Human resources professionals need to take special care to ensure that they know who falls under ARRA and who falls under the post-ARRA rules. It is a good idea to create two master lists.



• The lists should be monitored and updated every month, paying close attention during open enrollment periods, plan changes and life changes (births, weddings, etc.) until October 2011.



• Keep in mind that COBRA participants could migrate between the two groups. If they become eligible for other coverage, they'll no longer qualify for the ARRA subsidy, but they may still elect COBRA.



• If in doubt, ALWAYS check with the carrier and the plan document for guidance.



• Reconcile your group carrier invoices against the ARRA and post-ARRA participant lists and reconcile any discrepancies immediately.



• Continue to provide the payroll department with lists of ARRA participants for tax reporting purposes.

To sum things up, we're entering an age of COBRA dualism – at least for the short term. However, if the economy takes another downturn, there's always the possibility that ARRA could be resurrected retroactively back to May 31. And we thought this was a can of worms...