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Archives
2009 Issue 3
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District of Columbia Health Insurance Continuation for Small Employers Extended to Nine Months New FEC Registration Requirement Affects Certain PACs New COBRA Premium Subsidies On February 17, 2009, President Obama signed the American Recovery and Reinvestment Act (the "Act") of 2009. One of the provisions of the Act provides for federal subsidies of COBRA continuation premiums paid by certain individuals who have lost health benefits plan coverage due to involuntary termination of employment. The Act also extends these subsidies to individuals who have lost health benefits plan coverage due to involuntary termination of employment from organizations that are too small to be subject to COBRA, but that are subject to state "mini-COBRA" laws requiring health insurance continuation. The Act imposes several new requirements on employers that need to be implemented in a very short period of time. Under the Act, any employee (and certain dependents) who has lost employer-provided group health insurance coverage as a result of the involuntary termination of employment between September 1, 2008 and December 31, 2009 is eligible for a federal subsidy on their COBRA premiums or on premiums paid under state mini-COBRA provisions. "Involuntary termination of employment" includes not only layoffs associated with the economic downturn, but also any employer initiated termination for reasons other than gross misconduct. Subsidy Eligibility For a period of up to nine months, the subsidy is equal to 65 percent of the premium if the terminated employee (or their eligible dependents) pays 35 percent of the premium. In return for covering the subsidy, the federal government will reimburse the employer in the form of a payroll tax credit. The IRS has recently revised Form 941 and updated its guidance to enable employers to receive the credit. Where the employee does not pay 35 percent of the full premium or where the employer subsidizes or fully pays the premium, the full 65 percent credit is not available. The subsidy is prorated for those individuals with a modified adjusted gross income of $125,000 in the year in which the subsidy is received ($250,000 for joint filers). The subsidy is not available to those individuals with modified adjusted gross income that exceeds $145,000 ($290,000 for joint filers). The subsidy becomes available for premiums due on or after the effective date of the Act, which will be March 1, 2009, for most employers. The subsidy is available to eligible individuals who are currently enrolled in COBRA or the state equivalent; who initially declined to enroll in COBRA but otherwise meet the eligibility requirements and decide to enroll now; who enrolled in COBRA and later terminated their coverage for reasons other than finding new employment with alternate health insurance coverage and wish to enroll again; and who subsequently become eligible for health continuation coverage. Generally, the subsidy is no longer available if the qualified beneficiary becomes eligible for coverage under another group health plan or Medicare, or the nine month subsidized period ends. Individuals whose premium payments are subsidized must notify the plan providing them coverage if they become ineligible. Failure to do so can result in a penalty that is equal to 110 percent of the subsidy that was provided to the qualified beneficiary after the date they became eligible for other coverage. Employers have 60 days to come into compliance with the Act's requirements. Because some individuals will be eligible for the subsidy prior to the time by which employers have updated their procedures, the Act allows for a transition period whereby the qualified beneficiary may pay the full premium for March and April 2009 and then receive a credit against future payments (if the overpayment is expected to be applied within 180 days) or a refund (within sixty days). Employers should note that they cannot claim a subsidy credit from the federal government until the 35 percent premium payment has been received from someone other than the qualified beneficiary's employer. All persons who became qualified beneficiaries between September 1, 2008 and December 31, 2009 must be notified of the changes in the law that provide for subsidized premiums. For individuals who already fit into this category, a supplemental notice must be sent to those currently enrolled in COBRA to inform them of the subsidies and to others who declined or terminated enrollment in COBRA to give them a second opportunity to enroll in light of the new subsidy provisions. Employers must also update their notices going forward to include the new information about the subsidy. Model Notices for Employers and Insurers The Department of Labor recently issued model notices to help employers and insurance plans meet their obligations under the Act. The notices must be provided to qualified beneficiaries by April 18, 2009. The notices can be found on the Department of Labor website. There are four model notices:
By Rachel Jacobs  District of Columbia Health Insurance Continuation for Small Employers Extended to Nine Months Under DC law, employers that are not subject to Federal COBRA because they did not have 20 employees in the previous calendar year nevertheless are required to provide health insurance continuation to employees. On March 3, 2009, the DC Council passed emergency and temporary legislation to extend the period of coverage from three months to the period of time the subsidy is available to qualified beneficiaries under the American Recovery and Reinvestment Act, which is nine months for those losing health insurance coverage as a result of involuntarily termination of employment through December 31, 2009. Therefore, when issuing all COBRA notices, including the Alternative Notice discussed above, DC employers not subject to Federal COBRA must offer nine months of coverage to qualified beneficiaries eligible for the federal subsidy as a result of involuntary termination of employment and for DC health continuation coverage after the enactment date of March 16, 2009. By Ruth Eisenberg New FEC Registration Requirement Affects Certain PACs A "lobbyist/registrant PAC" - a political committee that is established or controlled by a registered lobbyist or an organization employing lobbyists (for example, a 501(c)(4) organization that employs registered lobbyists and operates a connected PAC) - must now identify itself as such by checking a box on its PAC registration form (FEC Form 1 - Statement of Organization). The form was recently revised by the FEC for this purpose. The regulation was needed to help candidate committees and so-called "leadership PACs" controlled by elected officials report "bundled" contributions from the PACs of lobbyists and lobbying organizations as required by the Honest Leadership and Open Government Act of 2007 (HLOGA). One of HLOGA's goals is to require greater public disclosure of the activities of lobbyists, their employers and their fundraising efforts on behalf of federal candidates and elected officials. A lobbyist/registrant PAC has until March 29, 2009 to amend its FEC Form 1. By Christine Tschiderer This publication is designed to provide accurate and authoritative information about the subject matter covered. It is not distributed with the intent to render legal, accounting, or other professional advice. The services of a competent professional should be sought if legal advice or other expert assistance is required. Newsletter Home | HarmonCurran Home | |