April 20, 2009
Payments to Insurers under Federal COBRA under Notice 2009-27
Filed under: News
Vision Payroll

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 Payments to Insurers under Federal COBRA under Notice 2009-27.

For plans subject to COBRA that are not multiemployer plans and for which the insurer collects the premiums directly from the qualified beneficiaries, the insurer is required to treat the payment of 35% of the premium by assistance eligible individuals as payment of the full premium, regardless of when the employer pays the remaining 65% of the premium. Failure to do so may subject the employer to the excise tax under §4980B(e)(1)(B) of the Internal Revenue Code of 1986.

The next topic covered will be Comparable State Continuation Coverage. Contact Vision Payroll if you have any questions on Notice 2009-27.


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