Released 3-24-09 3:00 PM MST
IMPORTANT UPDATE FOR GROUPS WITH LESS THAN 20 EMPLOYEES
Per the Division of Insurance this morning, the retroactive election of State Continuation coverage will NOT be allowed for employees term’d prior to the passage of the new ARRA act on February 17. In other words, those employees involuntarily term’d prior to February 17 cannot now elect State Continuation if they previously declined coverage, and they are most likely NOT eligible for any subsidy even if they did elect the State Continuation coverage prior to February 17.
Logic for this decision: The COBRA regulations only applied to groups with 20+ employees until the passage of the ARRA act on February 17. Therefore, the retroactive part of the act cannot apply to groups of less than 20 employees. However, an employee involuntarily terminated on or after February 17 could be eligible for the subsidy (if all criteria are met) no matter what size company terminated his employment. In short, the new COBRA laws only apply to groups with less than 20 employees as of February 17 – all terminations prior to that date are not affected by the new law.
IMPORTANT: The Division of Insurance recommends that you send the Alternative notice (http://www.dol.gov/ebsa/COBRAmodelnotice.html) to all employees who have terminated employment (voluntarily or involuntarily) with your group February 17 or later. You do not need to send any notice to those employees term’d prior to February 17.
To emphasize a point in the first paragraph: At this point in time, it looks likely that those who did elect State Continuation that started prior to February 17 would NOT be eligible for the subsidy. The DOI has not published anything official on this yet, but this is most likely going to be the case, if any affected employee should ask.
The Division of Insurance is also working out details with the insurance carriers where the carriers would be responsible for the administration of involuntarily-term’d State Continuation employees. The carrier would collect the premiums and take the tax credits on their own payroll filings, leaving the employer with no responsibility for these employees beyond notifying the carrier of the termination. At this point, we have no idea exactly how that’s going to work or what happens to money you’ve already collected for March/April premiums. The DOI is working on getting something out in the next few days, and we will, of course, get the information to you as soon as we can. In the meantime, all we can advise is to proceed as usual until you’re notified differently.
Released 3-23-2009 1:00 PM MST
Due to the lack of a complete legal definition of “involuntary termination”, it is recommended that the new COBRA notices be issued to ALL terminating employees and their dependents terminated since last September 1. There are some situations where, even though the employee signed a letter of resignation, they may still be considered an “involuntary termination” by the Department of Labor. In these situations, the affected individuals are going to need to call the Department of Labor to see if they qualify – it is not the employer’s responsibility to figure this out. However, it is the EMPLOYER’s responsibility to send out the new notice so the affected individuals know they have the right to call the Department of Labor and inquire.
According to the Department of Labor, the new subsidy rules apply to terminations that are an employer-based decision. A divorce situation or overage dependent being dropped from coverage are carrier-based decisions based on the policy rules, so these COBRA/State Continuation opportunities would not be eligible for the subsidy. Additionally, reduction in work hours resulting in loss of health insurance coverage would also be a carrier-based loss of coverage and therefore not eligible for the subsidy – they would be eligible for COBRA or State Continuation, but not the subsidy.
Again, the rules and definitions are still be worked out. If in doubt as to whether someone may be eligible, it is recommended that you send the notice and let them work with the Department of Labor to determine eligibility – therefore, send the new notice to ALL terminated employees from 9-1-08 and continuing through the end of 2009, regardless of the reason for their termination.
Links to the notices can be found directly at the Department of Labor website, http://www.dol.gov/ebsa/COBRAmodelnotice.html.
Released 3/19/2009 11:30 AM MST
The Department of Labor has released four versions of the notices. Use this link: http://www.dol.gov/ebsa/COBRAmodelnotice.html
There is a separate notice for each situation including one notice for those governed by State Continuation (less than 20 employees). The forms are somewhat complex and include a lot of optional wording that may or may not apply to your situation. For questions, please contact the Department of Labor toll-free at 1-866-444-EBSA.
For those unsure about the State Continuation requirements, please see the COBRA vs. State Continuation comparison sheet. For further questions on State Continuation, please call the Colorado Division of Insurance at (303) 894-7499.
PowerPoint Presentation on New COBRA Regulations
IRS Form 941/Questions - link to IRS website with updated forms and FAQ's.
To summarize: The American Recovery and Reinvestment Act of 2009 (ARRA) provides for a 65% reduction in COBRA premiums for certain assistance eligible individuals for up to 9 months. An assistance eligible individual is a COBRA “qualified beneficiary” who meets all of the following requirements:
- Is eligible for COBRA continuation coverage at any time during the period beginning September 1, 2008 and ending December 31, 2009;
- Elects COBRA coverage (when first offered or during the additional election period), and
- Has a qualifying event for COBRA coverage that is the employee’s involuntary termination during the period beginning September 1, 2008 and ending December 31, 2009.
Those who are eligible for other group health coverage (such as a spouse's plan) or Medicare are not eligible for the premium reduction. Other limitations may also apply. There is no premium reduction for periods of coverage that began prior to February 17, 2009.
Individuals who request treatment as an assistance eligible individual and are denied such treatment by their group health plan may have the right to appeal to the Department. The Department is currently developing a process and an official application form that will be required to be completed for appeals.
Employers will be responsible for paying the remaining 65% of the health insurance premium and taking a credit on their next payroll tax submission. Employers will also bear the responsibility of sending the appropriate notices to qualified employees within 60 days of February 17.
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