Effective Immediately Changes to Cobra Regulations

THE CHANGE IN COBRA REGULATIONS ENACTED BY PRESIDENT OBAMA ON FEB. 17TH, EFFECTS ALL NEW JERSEY COMPANIES DUE TO NJ CONTINUATION IT IS NOT RESTRICTED TO FEDERAL COBRA GUIDELINES OF COMPANIES WITH 20 OR MORE EMPLOYEES

Pls read the following recap from Two River Benefits, any questions you can call 732-517-0220

COBRA & State Continuation Premium Assistance Via

“The American Recovery and Reinvestment Act of 2009″

As part of our Two River Benefits continuing effort to educate the NJSA to changes in HR law, please read the following on this new act which President Obama enacted into law on February 17^th, 2009.

Regarding employers that must comply with COBRA, Federal law:

All NJ, employers, including self-insured employers, with 2 or more on payroll (including full time, part time, union and non-union) for 50% of business days in the preceding year must offer COBRA continuation of the group health plan. The employer determines what full time hours are (up to 40 hours for Federal COBRA purposes). Employees working less than full time count as fractions.

Please note the following clarification regarding the American Recovery and Reinvestment Act of 2009:

• The Act provides workers who were involuntarily terminated for other than gross misconduct between September 1, 2008 and through Dec. 31^st 2009, and who failed to initially elect COBRA or state continuation coverage because it was unaffordable, an opportunity to enroll on a prospective basis.

• Election is anytime beginning with the enactment on February 17, 2009 and 60 days after notification by the employer/ plan sponsor.

• The time without coverage shall be disregarded in determining a break for the purpose of pre-existing condition limitations.

• If the assistance eligible individual elected COBRA prior to the enactment, the individual is also eligible for the subsidy on a prospective basis.

• The Act provides a 65% subsidy for COBRA and state continuation premiums for up to nine months for workers and their families. The 2% allowable surcharge for administrative expenses is included meaning the subsidy is 65% of 102%.

• The Act requires notices of eligibility for COBRA and continuation coverage that must include the availability of premium reduction. The Departments of Labor and Treasury must furnish sample notices by March 19, 2009 (30 days from enactment) and the employer / plan sponsor must send notices to eligible persons by April 18, 2009 (60 days from enactment).

• The maximum allowable time on continuation is counted from when the person was involuntarily terminated and lost coverage. Example: Employee was terminated 9-15-2008 and the last day of coverage was 9-30-2008. The terminated employee’s 18 months starts from 10-01-2008 regardless of when s/he elects by this Act.

• The subsidy terminates upon becoming eligible for any group health plan or Medicare. Time in a probationary period does not count as being eligible meaning the person remains eligible for the subsidy until they are actually eligible to enroll in the new group health plan.

Individuals who do not notify the employer of eligibility under another group health plan are subject to a penalty of 110% of the premium reduction provided.

• The employer may permit the assistance eligible individual to elect different health coverage offered by the employer than what s/he had prior to the termination event

The individual has 90 days to enroll after first being notified.

The alternative coverage does not permit an election of standalone dental, vision, a health FSA or HRA.

The premium cannot exceed that of the coverage the individual had before the termination/ loss of coverage.

The coverage must be available to all active employees.

• To ensure that this assistance is targeted at workers who are most in need, taxpayer’s with a gross income of between $125,000 and $145,000 are eligible for a subsidy on a proportionate basis. Taxpayers with a gross income of more than $145,000 are not eligible for the subsidy.

• The Internal Revenue Code is amended to provide for a reimbursement to an employer / plan sponsor of the amount not paid by plan beneficiaries by treating such amounts as a credit against payroll taxes.

The employer pays the carrier 65% of the continuation premium along with the 35% from the assistance eligible employee. The employer then deducts the amount outlaid for the premium from the amount paid with the payroll filing. If the payroll tax is less than the amount paid out, the tax liability would be zero and the Department of Treasury would send a refund check.

• The Act directs the Secretary of the Treasury to provide such rules, procedures, regulations, and other guidance as may be necessary and appropriate to prevent fraud and abuse.