ARRA provides for a federal subsidy of 65% of the applicable COBRA premium for up to nine months to eligible individuals who were involuntarily terminated between September 1, 2008, through December 31, 2009.
In a nutshell, employees on COBRA will no longer be responsible for 100% of the premium. The employer will now pay 65% of the premium for up to nine months of coverage. The reimbursement process for employers is on a "credit" basis—such that employers will "front" the premium and will then take a "credit" for the amount of the subsidy on their federal payroll tax submissions.
The exact notification and reimbursement processes are still being worked out. Not wanting to add to confusion or misinformation, we advise schools to keep their eyes open for further details from the federal government and your benefits provider (and/or COBRA compliance vendor).
Additional information is available from the following sources:
Workforce Magazine: How Does the Stimulus Bill Change COBRA Provisions?
Society for Human Resources Management (SHRM): COBRA Coverage Expansion: HR Action Steps to Take Now
IRS: COBRA Health Insurance Continuation Premium Subsidy
—and—
IRS: COBRA Answers for Employers (including newly revised versions of Form 941 for payroll reporting)
