Below is a brief explanation of the new COBRA provisions contained within the legislation signed by President Obama on February 17, 2009.

As I'm sure you have heard, this provision provides a subsidy to those employees who were, or will be involuntary terminated from employment. The intent is to alleviate some of the financial burden of paying medical premiums.

Highlights of the Act are as follows:

• It is anticipated that these provision will become effective 3/1/09
• The subsidy will be 65% of the required COBRA premium
• Maximum duration of the subsidy is 9 months or earlier if the worker becomes eligible for other coverage under a group insurance plan
• If the employee becomes eligible under a group plan and does not terminate their COBRA coverage, they may be subject to a penalty of 110% of the subsidy amount
• The subsidy will be credited against the payroll taxes of the entity receiving the 35% payment from the COBRA participant (further clarification on this point has been requested).
• Eligible individuals are those involuntary terminated from employment between 9/1/08 and 12/31/09 and is, or was eligible to elect COBRA during that time.
• The subsidy is not retroactive for those who elected COBRA on or after 9/1/08 but only from the date of the Act (in most cases 3/1/09) forward.
• The subsidy is phased out for higher income families

We are in contact with our attorneys for further clarification on this act.

If you have any questions, please feel free to contact me.