The Internal Revenue Service (IRS) has released 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.

In recently issued guidance, the IRS stated that when an employer makes a “reasonable interpretation of the applicable statutory provisions and IRS guidance” while determining that an employee was involuntarily terminated, the IRS won’t challenge the determination for purposes of deciding if the employer is entitled to the COBRA premium reduction credit. The employer is required to maintain the supporting documentation to support the determination. Contact Vision Payroll if you have any questions on the COBRA premium reduction credit.