The Internal Revenue Service has published further guidance for employers explaining how to obtain reimbursement for the new employer-paid COBRA subsidy mandated by the American Recovery and Reinvestment Act of 2009.  As we previously reported to you (CM - 2/24/09), the new law requires employers to fund 65% of eligible employees' COBRA continuation premiums for up to 9 months.  The guidance explains that employers can claim the COBRA subsidy as a credit on their quarterly employment tax return, IRS Form 941, which has been updated to allow for this credit.

 

According to the IRS guidelines, employers are not required to provide any supporting documentation when filing Form 941, but must retain all supporting documentation for the subsidy credit sought.  The pertinent supporting documentation identified by the IRS includes:

 

-  The dates of receipt and the amounts of each eligible individual's 35% share of the COBRA premium.

 

-  In the case of an insured plan, a copy of the invoice or other supporting statement from the insurer and proof of timely payment of the full COBRA premium to the insurer.

 

-  In the case of a self-insured plan, proof of the premium amount and proof of the coverage provided to the assistance eligible individuals.

 

-  Verification of an individual's involuntary termination, including the date of the involuntary termination for each covered employee eligible for the subsidy;

 

-  Proof of each assistance eligible individual's eligibility for COBRA coverage at any time during the period from September 1, 2008 to December 31, 2009, as well as the individual's election of COBRA coverage.

 

-  A record of the Social Security numbers of all covered employees, the amount of the subsidy reimbursed with respect to each covered employee, and whether the subsidy was for 1 individual or 2 or more individuals.

 

-  Other documents necessary to verify the correct amount of reimbursement.

 

To access the IRS COBRA resource for employers, which also contains a link to the revised form 941 go to (IRS).