| Issue: # 33 |
March 25, 2009 |
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Dear :
By now most of you have heard of the COBRA changes implemented by the federal government in the American Recovery and Reinvestment Act of 2009. The Department of Labor finally released the sample notice letters. Below you will find links to the notices for your review. There is no easy way to simplify this information. There are multiple letters and we have suggested one in particular.
The interesting news we've learned is that for groups with less than 20 employees that fall under the Commonwealth of Massachusetts' "Mini-Cobra" rules, the employer will not have to front the premium/subsidy. Blue Cross, Tufts and Fallon have all announced they will be responsible for that. No word from Harvard Pilgrim yet. Please see below for more details.
Many of our clients have found these newsletters to be quite helpful and access archived newsletters on our website quite often. If you know anyone who may find this information of interest, please forward them this newsletter (there is a link on the bottom), and they can subscribe themselves. We would appreciate the referral.
Sincerely,
Bill Randell, CLU, CHFC Vanessa Costa, CLU,CHFC
Advantage Benefits Group, Inc.
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| Ask Beth
Q & A
Q: I know I need to send a COBRA notification letter to employees that we have recently had to lay off, but I don't have one that includes the new subsidy regulations. Where can I find that? Do I need to send a new letter to employees that have already been on COBRA?
A: The Department of Labor (DOL) just released model notices that must be sent to all COBRA eligible employees (and qualified beneficiaries). There are multiple versions of the letter. After reviewing them all, we have put together our own letter, based on their "alternate version", for our Massachusetts based clients and it can be accessed on our website.
This notice must be mailed by April 18, 2009 to all employees (and qualified beneficiaries) who:
- Had a qualifying event at any time from September 1, 2008 through February 16, 2009; and
- Either did not elect COBRA continuation coverage, or who elected it but subsequently discontinued COBRA. (This notice must be provided by April 18, 2009.)
ANY QUESTIONS ON THESE COBRA LETTERS?
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65% COBRA Subsidy
Does an employee qualify?
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There are income guidelines to determine if employees qualify. The subsidy phases out for individuals with modified adjusted gross incomes between $125,000 and $145,000, or between $250,000 and $290,000 for those filing joint returns. For more information, here is a link to the IRS page.
Employers, plans & insurers may treat all qualified beneficiaries, who lost coverage due to involuntary termination of employment between September 1, 2008 and December 31, 2009, as eligible for the subsidy, regardless of their income level. If the individual has income over a certain amount, then receipt of the subsidy will impact the individual's income tax return for that particular year (i.e., the government will seek to recoup the subsidy via income tax filing). These individuals may also choose to waive the subsidy and pay the full COBRA premium to avoid tax consequences. |
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Mini-COBRA 2-19 Employees
Some carriers will pay the 65% for the employer
One of the problems for business owners is that not only must they try to collect premiums from former employees, but with the new law, they now have to advance the subsidy money. Small businesses are already experiencing cash flow problems. Requiring employers to pay 65% of the premium for the COBRA-eligible employees will cause more strain, even though they will be able to take a credit when filing the quarterly 941(pay report). For more information, here is a link to the IRS page.
It was just announced, however, by Blue Cross, Fallon and Tufts that they will cover the subsidy/premiums for employers between 2 - 19 employees. The insurance carriers will in turn seek reimbursement by claiming a credit when they file their own quarterly payroll tax filing. |
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| Commonwealth of Massachusetts COBRA Subsidy
How it integrates with federal COBRA subsidy |
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Check out this story on BusinessInsurance.com . You may or my not be aware that the Commonwealth of Massachusetts had its own COBRA subsidy program called the Medical Security Program, that pays 80% of the COBRA premium for income eligible employees. One would assume that it would now be lowered to integrate with the 65% federal subsidy.
NO INTEGRATION... EMPLOYEES GET BOTH SUBSIDIES!
The Commonwealth of Massachusetts will now pay 80% of the employees remaining 35% contribution, after the 65% federal subsidy. In the end, an income eligible beneficiary in the Commonwealth of Massachusetts will end up paying 7% of the health insurance premium. In essence the combined federal & Commonwealth of Massachusetts subsidy will be 93% of the premium. To learn more about this Commonwealth of Massachusetts plan, click here.
How many employers pay 93% of the health insurance premium today? | |
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