ARRA

Advanced Benefit Strategies, Inc.

Your Subtitle text

ARRA

On February 13, 2009 Congress passed the American Recovery and Reinvestment Act. Knowledge of this new legislation is extremely important for business owners of all sizes. The Act changes the rules for Cobra and State Continuation. These changes affect anyone with 2 or more employees in DC/MD/VA.

Read the American Recovery and Reinvestment Act for yourself (Premium Assistance for Cobra Participants begins on page 341) or see below for how our carriers are interpreting the new legislation.

Please feel free to call ABSI with questions about how the Act affects your business.

NOTICE: The DOL has updated its recommendations for model notices. The model notices can be found here.

It is important to note that the DOL is now requiring that anyone who experienced a qualifying event from 9/1/2008 to 12/31/2009 must receive a copy of the new model notice. This means that notices cannot be sent only to those individuals who were involuntarily terminated. They must be sent to all terminated employees. This is different than previous information released by the DOL.

The definition of the second chance look back provision is also being evaluated. It is not known at this time if the states of MD, VA & DC will allow a second chance look back for small groups (2-19 employees). We are awaiting further information from those states.

The second chance look back provision will give employees a second chance to take coverage going forward with no pre-existing condition limitations. We do not yet know if this applies to small group.

We will post more updates as they become available.

A few important highlights:

Eligibility for the premium subsidy plan is set to expire 12/31/2009.

The second chance look back provision will give employees a second chance to take coverage going forward with no pre-existing condition limitations.

Involuntarily terminated employees of small groups (2-19) are eligible for the subsidy going forward but it is not yet known if they are eligible for the second chance provision.

Once a terminated employee becomes eligible for group coverage under another contract (new coverage or spouse's plan) they are no longer eligible for the subsidy.

Both CareFirst BCBS and Cobra Control have released helpful memos containing frequently asked questions.

The IRS has released a new form 941 which contains a section for "Cobra Premium Assistance Payments" so that employers can deduct the 65% of the premium assistance for terminated employees out of their quarterly payroll taxes.

The instructions for form 941 explain how to obtain reimbursement for these expenses.

ABSI suggests you contact your accountant for any tax questions but we are here to help with any questions regarding the Act itself and how it impacts your business.

We also suggest that you refer to the Department of Labor website for official updates on this legislation. They recently published a Fact Sheet detailing how the DOL will interpret this new legislation.

We will post more information here as it becomes available.