Cobra Notices

The American Recovery and Reinvestment Act of 2009 materially altered the Consolidated Omnibus Budget Reconciliation Act (COBRA) and imposed

new rules that will require employers and plan administrators to take certain actions before April 18, 2009.

By April 18, 2009, plan administrators must notify all individuals who experienced or will experience a qualifying event between September 1, 2008, and December 31, 2009, of these new COBRA rules, even if the individual previously rejected or

discontinued COBRA coverage.

The U.S. Department of Labor (DOL) issued four model notices to be used with the new COBRA rules. The model notices can be found at www.dol.gov/ebsa/COBRAmodelnotice.html.

COBRA Premium Reduction and Tax Credit

The new rules give “assistance eligible individuals” a 65 percent subsidy toward the cost of their COBRA premiums.

The subsidy will ultimately be funded by the federal government through an offset of payroll taxes for the employer, who initially bears the burden of the subsidy. If the subsidy exceeds payroll taxes, the employer can obtain a refund of their payroll

taxes.