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  • Learn how the stimulus plan affects you
  • Discover how to reduce health care costs

What Does the Stimulus Plan Mean for COBRA?

PrimePay has been following many of the provisions that may have an impact on your payroll processing and business services. There are areas of interest for both businesses and individuals.

See How PrimePay's Tax Filing and COBRA Services Relate to the Stimulus Plan

As a service to clients we have compiled the following to describe how the Economic Stimulus Plan could affect your company as it relates to COBRA health coverage. They include:

COBRA Subsidies for Terminated Employees

COBRA permits terminated employees of most companies to purchase continuing health insurance coverage through their employer, at their own expense, for up to 18 months. To help provide relief to laid-off employees, the Stimulus Bill provides…

  • A 65 percent subsidy of these health care insurance premiums for up to 9 months for employees terminated for any reason, other than gross misconduct, after September 1, 2008 up to December 31, 2009.
  • Initial premium assistance for COBRA recipients will be provided by the employer.
  • Eligible terminated employees will only be responsible for 35% of the current cost of the insurance premium (or the deemed cost of coverage under an employer's self-insured plan).

Deadline for COBRA Subsidies Notification

Employers have 60 days from the date of enactment, or until April 18, 2009, in which to notify previously terminated employees about this premium subsidy and the right to a new enrollment period for COBRA coverage. The Department of Labor will shortly issue a model notice that employers may use for this purpose. The subsidy is subject to a phase-out for individuals with incomes over $145,000 and couples whose income exceeds $290,000 per year.

Claim COBRA Subsidies as Payroll Tax Credits

Employers can claim the COBRA subsidy amounts they pay as a credit against their payroll taxes on IRS Form 941.

  • The 2009 Form 941, released electronically, has recently been modified to accommodate these changes.
  • Lines 12 and 13 have been modified so employers can account for monies withheld and remitted to cover health premium payments instead of withholding taxes.
  • IRS has posted both the revised Form 941 and the form instructions to its website.

Payroll Tax Filing and COBRA Administration Services

If you subscribe to PrimePay's PrimeTax tax filing and payment service, PrimePay will handle these changes on your Form 941 and make sure you get the proper credits.

For clients that are interested in more assistance, PrimePay also provides a COBRA administration service called PrimeHRCOBRA. Contact your sales representative or your local PrimePay office for further details.

Please note, the information on the Economic Stimulus Plan is believed to be accurate and was gathered from sources believed to be reliable, but it is not intended to be relied upon as tax or other advice to specific clients. Companies seeking more detailed advice specific to their situation are encouraged to contact their CPAs or other professional advisors.