The Internal Revenue Service (IRS) 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 Comparable State Continuation Coverage.

Individuals who would otherwise be eligible under Federal COBRA may also qualify under comparable state laws that provide for continuation coverage for those who may not qualify under Federal COBRA. The fact the state plan has a different period of continuing coverage, different qualifying events, different qualified beneficiaries, or different maximum premiums generally does not mean the plan is not “comparable solely for those reasons.”

For plans subject solely to state law that require the insurer to provide continuation coverage, only the insurer may claim the premium reduction credit, even if the employer collects the reduced premium and pays the full premium to the insurer. The IRS left open the possibility that future guidance may change this conclusion.

The next topic covered will be Additional Issues. Contact Vision Payroll if you have any questions on Notice 2009-27.