The Internal Revenue Service recently released an advance copy of Notice 2009-27, Premium assistance for COBRA benefits. Pursuant to the American Recovery and Reinvestment Act of 2009 or ARRA, certain involuntarily terminated employees are eligible for employer-provided subsidies to help pay for their Consolidated Omnibus Budget Reconciliation Act (COBRA) continuation coverage. Employers may then claim a credit on their Form 941 to be reimbursed for the assistance provided. Vision Payroll provided an overview of Notice 2009-27 when it was first issued. Today we will be reviewing Coverage Eligible for Premium Reduction under Notice 2009-27.
Premium reduction is available for COBRA coverage for group health plans, including vision-only and dental-only plans, but not for flexible spending arrangements or FSAs under §106(c) offered under a §125 cafeteria plan. Health reimbursement arrangements or HRAs are eligible for premium reduction even though they qualify as FSAs under §106(c). That is because they are not provided through a §125 cafeteria plan. Non-health benefits, such as group life insurance, that are not eligible for COBRA continuation coverage are also not eligible for premium reduction.
Retiree coverage that doesn’t differ from that offered to “similarly situated active employees”, whether or not the cost is the same, is also eligible for premium reduction, as long as the cost to the employee does not exceed the maximum allowable under COBRA.