ARRA for Employee’s Health Care

American Recovery and Reinvestment Act (ARRA) of 2009, the economic stimulus legislation, were approved by the House of Representatives and Senate On Friday, February 13, 2009.

On April 3, 2009, the Office of Management and Budget (OMB) published Implementing Guidance for ARRA. This is the second installment of detailed government-wide guidance for carrying out programs and activities enacted in the Recovery Act.

Employers’ obligations under COBRA have been significantly increased by ARRA.

Employees who have terminated their employment between September 1, 2008 and December 31, 2009 are entitled to continue their heath care coverage through COBRA. What those employees need do is pay 35 percent of their premiums for up to nine months. Employers are obligated to pay for the remaining 65 percent. Apparently employer has to pay some money; however, they do not have any loss as they can deduct their cost from federal payroll taxes. Employers must immediately comply with the law by providing notice to eligible individuals, collecting 35% of the premiums from the employees, paying 65% themselves, and filing quarterly tax returns claiming a credit for the 65% subsidized amount.


ARRA mandates that plans notify certain current and former participants and beneficiaries about the premium reduction. Employers should send notices to employees who are involuntarily terminated between September 1, 2008 and December 31, 2009.

The Department created model notices to help plans and individuals comply with these requirements. Each model notice is designed for a particular group of qualified beneficiaries and contains information to help satisfy ARRA’s notice provisions. The forms were posted on the DOL website on March 19, 200