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 payroll tax credit on their Form 941 to be reimbursed for the assistance provided.
In recently issued guidance, the IRS reviewed the impact of amendments to state law. COBRA premium subsidies would apply to coverage elected during a special election period under amended state laws. This is true even if the state law allows coverage to begin later than the first coverage period beginning after February 16, 2009. If the election to begin COBRA coverage as of a later date is made, the nine-month period for premium subsidy would still begin effective with the first period of coverage after February 16, 2009. In addition, depending on state law, a delay in beginning coverage could affect the preexisting condition exclusion. Contact Vision Payroll if you have any questions on the COBRA premium reduction credit.