Wednesday, February 25, 2009

Stimulus Plan Includes COBRA Subsidy

Obama administration’s stimulus plan offered COBRA subsidies and was signed into law on February 17, 2009. Many employers have questions about the subsidies. The subsidy applies beginning March 1, 2009.

The ARRA (American Recovery and Reinvestment Act of 2009) included a provision to subsidize extended health insurance coverage under COBRA for some eligible employees. These eligible employees referred to as “assistance eligible individual” (AEI) is laid off through no fault of his or her own, or is a dependent of a laid-off employee.

According to the ARRA, the COBRA subsidy does not apply to flexible spending accounts. The maximum time for each assistance eligible individual is nine months. Employee can get 35 percent of the COBRA premium. Every AEI qualifies for the subsidy. However, according to the individual tax returns, high-income individuals and their spouses will be required to repay the subsidy.

If the AEI does qualify as a high-income individual her or she may waive the subsidy voluntarily and must pay 100 percent of the COBRA premium.

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