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Stimulus Act Changes To COBRA Will Require Immediate Action

    Client Alerts
  • February 20, 2009

This week President Obama signed the American Recovery and Reinvestment Act of 2009 (the "Act") which includes significant changes to the COBRA continuation rules applicable to employer-sponsored group health plans.  In general, the Act provides a federal government subsidy of 65% of COBRA premiums for up to a maximum of nine months for qualified beneficiaries who lose coverage under the group health plan due to the employee's involuntary termination of employment during the period beginning September 1, 2008 and ending December 31, 2009.  For most group health plans, this subsidy applies beginning March 1, 2009. 

The subsidy phases out for individuals whose adjusted gross income exceeds a specified limit.  Employers will advance the 65% subsidy and then generally recoup this amount by claiming a credit against federal payroll taxes. 

In addition to the subsidy, the Act mandates a number of requirements for employers, administrators and insurers, including notices to eligible qualified beneficiaries, employer filing requirements and group health plan amendments.

Parker Poe will distribute a detailed Client Alert on the Act's changes to COBRA and the steps employers will need to take to comply with the law in the near future.