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 Beginning of Premium Reduction Period under Notice 2009-27.
Premium reduction begins “as of the first period of coverage beginning on or after February 17, 2009…for which the assistance eligible individual [AEI] is eligible to pay only 35 percent of the premium…and be treated as having made full payment.” A period of coverage could be a month or some shorter period for which premiums are charged by the plan. If the plan charges premiums on the first day of each month for coverage that month, the first period of coverage possible would be March 2009. There is no provision to pro-rate coverage for February 2009 for otherwise eligible individuals.
If a plan requires employees who lose coverage during a month to pay for coverage for the remainder of that month in order to be eligible for COBRA continuation coverage and an employee loses coverage after February 17, 2009, the first period of coverage is the partial month of coverage. An exception is an AEI who elected as a result of the extended election period under ARRA. Such individuals are eligible for premium reduction only for the first full month of coverage.