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COBRA Rules Change; Notices Due April 18

Tuesday, April 7, 2009

The American Recovery and Reinvestment Act makes several important changes to requirements that contractors must meet in order to comply with COBRA. Among them: Contractors need to take immediate action to locate all eligible participants and distribute eligibility notices, since all notices must be distributed by April 18.

COBRA is the Consolidated Omnibus Budget Reconciliation Act, which gives workers and their families who lose their health benefits the right to choose to continue group health benefits provided by their group health plan for limited periods of time after a job loss.

Grant Thornton LLP’s Construction group and Compensation and Benefits practice have identified several key points in the new requirements.

• The changes are generally effective March 1, 2009, and require employers to pay 65 percent of COBRA continuation coverage premiums for “assistance eligible individuals” for up to nine months after their separation from service. The assistance eligible individuals pay only the remaining 35 percent of the premium.

• The United States Treasury will reimburse the employer responsible for the plan for the portion of the premium it pays (i.e., 65%) through a credit on its quarterly employment tax return (Form 941).

• An “assistance eligible individual” is generally defined as an employee who is involuntarily terminated between Sept. 1, 2008, and Dec. 31, 2009, and who elects COBRA coverage and pays 35 percent of the required premium amount.

“All contractors should note that appropriate documentation and filing the appropriate forms with the government is required in order to receive the reimbursement from the U.S. Treasury,” said Todd Taggart, tax partner and practice leader of Grant Thornton’s Construction practice.

Contractors and construction companies also need to take immediate action to locate all eligible participants and distribute eligibility notices, since all notices must be distributed by April 18.

To read Grant Thornton’s guidance New Group Health Plan COBRA Requirements, visit www.GrantThornton.com/construction.

Grant Thornton LLP is the U.S. member firm of Grant Thornton International Ltd, one of the six global audit, tax and advisory organizations.