The American Recovery and Reinvestment Act of 2009

The American Recovery and Reinvestment Act of 2009

Presented by: Chris / Brad

Maximum Efficiency Squared, LLC

Background

There are six major areas of ARRA that relate to new COBRA rules.

1. A premium subsidy;

2. Special COBRA election period;

3. COBRA plan enrollment change option;

4. Notification requirements;

5. Employment tax offset; and

6. *Health Coverage Tax Credit (HCTC).*The HCTC includes a 65% tax credit available to 3 groups of people eligible under the Trade Adjustment

Assistance (TSS) program and the Pension Benefits Guaranty Corporation (PBGC) and is therefore beyond the scope of this presentation.

Effective Date

Effective dates of Coverage.

COBRA continuation coverage elected during the new election period will start with the first coverage period beginning on or after February 17, 2009. If the plan premiums are based on a monthly billing period, the first subsidy would begin March 1, 2009.

Applicability

All of the standard COBRA rules still apply!

The ARRA covers all group plans that currently must meet COBRA requirements.

In states with “Mini-COBRA” statutes, the subsidy would be available where state continuation coverage requirements are comparable to the continuation coverage requirements under COBRA.

Federal Regulations

The two principal agencies responsible for elements of this program are:

The U. S. Department of Labor (DOL);

The Internal Revenue Service (IRS).

State Regulations

“Georgia Continuation applies when the employer has had less than twenty employees for six months in the prior calendar year. Groups of from 2 – 19 qualify for 3 months.”

NOTE: To qualify, the employee must have had coverage under the plan for at least 6 months.

Premium Subsidy

Assistance Eligible Individual(AEI)

An individual who is or was otherwise eligible for COBRA continuation coverage, who lost coverage under their employer-sponsored group health plan due to an involuntary termination of employment between September 1, 2008 and December 31, 2009, and who elects COBRA continuation coverage is an Assistance Eligible Individual (AEI).

Who Provides the Subsidy?

Depending upon plan design and responsibilities the subsidy may be the obligation of the employer, insurer, multi-employer arrangement or a COBRA Administrator.

The ACT defines an entity entitled to reimbursement as:

- 1) Multi-Employer Plan;

- 2) Employer Self-Funded Plan; or

- 3) Fully Insured Plan.

2-Month Subsidy Transition Relief.

Amount of Subsidy

The subsidy is based on:

- Standard COBRA rates including 2% (102%);

- Subsidy rate is 65% on all plan level enrollments;

- Subsidy is not taxable income to AEI.

Duration of Subsidy

Generally the subsidy is available for 9 months, but can end earlier in the case of:

- The expiration of the maximum COBRA continuation coverage if sooner, typically 18 months;

- Eligibility for other coverage.

Income Limits

Maximum Earnings (modified adjusted gross income) in the Act are:

- $125,000 Single; $250,000 Family.

Subsidy Recovery is required for tax payers with Income Exceeding Stated Limits.

One-time “Opt Out” Election Provided.

Special COBRA Election Opportunities

Second COBRA Election Opportunity

COBRA Continuation Coverage.

Extended 60-day Election Window;

-Change to 63-Day Break Rule.

Modified COBRA Coverage Period.

COBRA Election Change Opportunity

Option to Elect Lower Cost Coverage.

Exclusions:

- Health FSAs;

- Dental only plans;

- Vision only plans;

- Counseling (EAP) plans;

- Any combination of above.

New Subsidy Notice Requirements

Employer Notification Requirements:

- No later than April 18, 2009 health plans should notify individuals about the second election period available to them.

Employee Notification Requirements:

- Qualified Beneficiaries must notify the health plan if they become eligible for coverage elsewhere.

Payroll Tax Credits

Payroll Tax Credit

Payroll tax deposits/941 filings are the mechanism for claims.

Tax credit may only be taken after the individual has paid their 35% of premiums.

Revised 941s.

No New W-4s at this time.

Reporting

Employer Reporting

“Each person entitled to reimbursement under subsection (a) for any period shall submit such reports (at such time and in such manner) as the Secretary may require including-”

An attestation of involuntary termination;

A report of the amount of taxes offset for the period;

A report containing the social security numbers of all covered employees and the amount of subsidy reimbursed for each employee and a designation of the level of coverage 1 individual or 2 or more individuals.

ER “To Do” List

Compile a list of COBRA qualified beneficiaries.

Revise payroll system to capture new subsidy related information.

Fully insured plans – verify appropriate procedures for enrolling AEIs.

Self-funded plans – review stop loss contracts.

Modify applicable COBRA premiums for March 2009.

Review/modify Summary Plan Descriptions.

Disclaimer

In some instances, elements of the ARRA are not defined and are subject to various interpretations. Moreover, federal agencies responsible for implementing ARRA have not yet issued any specific guidance on many questions concerning the Act.

This presentation is intended as general information only and is not intended as legal opinion. Should you have questions or need assistance with this subject matter, Max E2 recommends that you seek legal advice.

This information and related materials are presented to provide information and best practices on the subject matter. Therefore, we make no express or implied guarantees.

The Federal Register and the Code of Federal Regulations are the official source for regulatory information published by the Department of Labor and the Internal Revenue Service.