On March 4, 2009, McGuireWoods
Compensation teams hosted a teleconference on the implementation of the
COBRA premium subsidy provisions included in the economic stimulus act. The
American Recovery and Reinvestment
Act (ARRA) includes a temporary government premium subsidy for COBRA
coverage for individuals involuntarily terminated between Sept. 1, 2008, and
Dec. 31, 2009. The subsidy is 65% of the premium for up to nine months. The
government portion will be satisfied by the employer’s payment of the subsidy
with a subsequent credit in the amount paid against payroll taxes. For most
plans, the new subsidy provisions become effective for coverage March 1, 2009.
Because of the short lead time to comply, employers required to provide COBRA
continuation rights to former employees need to begin compliance efforts
immediately. Topics include notice, election, and reporting requirements;
required employer prepayment of COBRA premium subsidy; and payroll tax credit
for the subsidy..