From NLBMDA: New COBRA Requirements Take Effect

From the National Lumber and Building Materials Dealer Association

The recent stimulus legislation contained some important changes to COBRA health care coverage originally passed in 1986. COBRA provides certain former employees, retirees, spouses, former spouses, and dependent children the right to temporary continuation of health coverage at group rates by paying their employer the premium plus some administrative costs. Group health plans for employers with 20 or more employees on more than 50 percent of its typical business days in the previous calendar year are subject to COBRA, although some states have COBRA-like requirements too with different thresholds. The new law includes an enhancement - a temporary 65 percent subsidy for COBRA premium payments for nine months.

It has a quirky delivery method for the subsidy. The employee would pay the employer the lowered 35 percent of premium. Employers would take a credit against their payroll taxes for the amount of the subsidy. No additional federal money changes hands (unless the total subsidies exceed the employer's payroll taxes) between the former employee, employer, and the government. There are also new notice requirements that must be given to eligible employees who qualify under the new provisions. The Department of Labor has established a website with employer guidance, FAQs and sample notices.