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 discussed the results when a group health plan (other than a multiemployer plan) covers employees of two or more employers that are members of a single controlled group. A controlled group is considered a single employer for purposes of employee benefits but not for payroll taxes. Consequently, the credit is attributed to the former employer whose termination of the employee made the employee eligible for the subsidy. Contact Vision Payroll if you have any questions on the COBRA premium reduction credit.