by GBS

The American Recovery and Reinvestment Act (ARRA) provided a COBRA premium reduction for eligible individuals who were involuntarily terminated from employment through the end of May 2010. Due to the statutory sunset, the COBRA premium reduction under ARRA is not available for individuals who experience a qualifying event of involuntary termination of employment after May 31, 2010. However, individuals who qualified on or before May 31, 2010 may continue to pay reduced premiums for up to 15 months, as long as they are not eligible for another group health plan or Medicare.

On July 6, Assistant Secretary of Labor Phyllis C. Borzi issued a statement regarding the COBRA premium reduction under the American Recovery and Reinvestment Act (ARRA): For a copy of Assistant Secretary Phyllis Borzi’s statement, click on the following link:
http://www.dol.gov/ebsa/newsroom/2010/ebsa070610.html

The Unemployment Compensation Extension Act of 2010 signed by the President on July 22, 2010, did not include an extension of the COBRA premium reduction.

A model general notice and a model election notice for individuals with a qualifying event after May 31, 2010 can be obtained from the COBRA section on the DOL’s website at:
http://www.dol.gov/ebsa/COBRA.html

These notices are virtually unchanged from the pre-ARRA models provided by the DOL in 2004.

President Obama, on Dec. 19, 2009, signed the Fiscal Year 2010 Defense Appropriations Act which includes amendments to the federal American Recovery and Reinvestment Act of 2009 that provided health care premium assistance for certain individuals. ARRA revised the federal Consolidated Omnibus Budget Reconciliation Act of 1985 to require employers with COBRA-covered group health plans to pay 65 percent of health care premiums for up to nine months for assistance eligible individuals who lose health care coverage due to employees’ involuntary employment termination between Sept. 1, 2008, and Dec. 31, 2009. The new law expands the duration of the 65 percent premium assistance from nine to 15 months, and extends premium assistance to individuals who lose health care coverage due to employees’ involuntary employment termination between Sept. 1, 2008, and Feb. 28, 2010.

On Friday, November 6, 2009, President Obama signed the “Worker, Homeownership, and Business Assistance Act of 2009″ which gives tax breaks to large corporations and extends the homebuyer’s credit.

The American Recovery and Reinvestment Act of 2009 extended the first-time homebuyer credit for purchases before December 1, 2009 and increased the credit to $8,000. The new law extends the date to close on a credit eligible purchase to before May 1, 2010. And for purchases subject to a written binding contract by April 30, 2010, the closing would have to be before July 1, 2010.

The credit is no longer restricted to first-time homebuyers. Taxpayers are able to claim the credit on the purchase of a new home if they have owned and used a prior residence as their principal residences for any 5 consecutive-year period during the 8-year period ending on the date of the purchase of the new principal residence. However, the homebuyer credit for these “long-time residents” cannot exceed $6,500.

The credit is phased-out based upon modified Adjusted Gross Income (AGI). The credit begins to be phase-out for joint filers with modified AGI above $225,000 ($125,000 for other filers). Prior to the new law the phase-out began at $150,000 and $75,000 respectively.

The credit is only available for homes with a purchase price of $800,000 or less. Previously there was no price ceiling.

A taxpayer is allowed to elect to treat the purchase as occurring on December 31 of the calendar year preceding the year of purchase in order to accelerate the refund.

The new rules take effect on November 6, 2009.

Net Operating Loss carryback period extended to five years.

The new law permits any business to elect up to a 5-year carryback for net operating losses (NOLs) incurred in either 2008 or 2009, but not both. Businesses are able to offset 50% of the available income from the fifth year and 100% of all income in the remaining four carryback years. Eligible small businesses already had the ability to elect to carryback their 2008 NOLs either 3, 4, or 5 years under the American Recovery and Reinvestment Act. These small businesses are able to elect to carryback losses from 2009 up to 5 years. Additionally, the 90% limitation on the use of any alternative tax NOL deduction is suspended for these NOL carryback deductions. The NOL provision is not available to a taxpayer if the federal government acquired an equity interest (or right to acquire such an interest) in the taxpayer under the Emergency Economic Stabilization Act of 2008.

Click here for more information

The IRS issued guidelines on Sept. 9 that outline the conditions under which multiemployer plan sponsors can automatically revoke a funding status freeze requested under the Worker, Retiree, and Employer Recovery Act of 2008.

The act, which offered relief for defined benefit funding affected by last year’s financial markets collapse, allowed the plans to freeze their funding status from Oct. 1, 2008, to Sept. 30, 2009.

For more information, see http://www.irs.gov/pub/irs-il/2008-2009pgp.pdf.

According to Hewitt Associates, COBRA enrollment has doubled since the enactment of The American Recovery and Reinvestment Act of 2009 (ARRA) earlier this year.

One of the provision of the ARRA provides COBRA premium assistance for employees who are involuntarily terminated from Sept. 1, 2008, to Dec. 31, 2009. Qualified participants pay 35 percent of the COBRA premium, with the remaining 65 percent subsidized by the employer and reimbursed by the federal credit to the employer’s payroll taxes.

“From March 2009 to June 2009, monthly COBRA enrollment rates for Americans eligible for the subsidy averaged 38 percent, up from 19 percent for the period of September 2008 through February 2009,” Hewitt said. Industrial manufacturers experienced an 800 percent increase in COBRA enrollments following enactment of the subsidy, while construction, leisure, and retail businesses experienced a 300 percent increase in enrollments, Hewitt found.

Find out more about the analysis here.

One aspect of the recently approved federal stimulus bill – the American Recovery and Reinvestment Act -offers eligible terminated employees a 65 percent discount on COBRA coverage.  Enacted in 1986, COBRA allows former employees to continue their health insurance coverage for up to 18 months after they are terminated.

 The issue facing business owners is that they must pay 65 percent of the COBRA premium and then file for reimbursement through a payroll tax credit.  Employees pay the other 35 percent.  This discounted rate could potentially cause a dramatic increase in COBRA election by former employees.

 To avoid substantial penalties, employers were required to mail out COBRA notices by April 18, 2009 to eligible employees who had been laid off since September 1, 2008.  This new regulation affects most companies with 20 or more employees.

Some companies are worried that the federal requirement could cause cash flow problems because of the up-to-three-month delay for reimbursement.  And cash flow problems could cause some financially strapped companies to lay off more employees, freeze or cut salaries, or eliminate some benefits.

How the new COBRA rules work:

• The federal government will provide a 65 percent subsidy for up to nine months of the COBRA premium retroactive to March 1 for certain terminated employees.
• To be entitled to the subsidy, employees must have been involuntarily terminated between September 1, 2008, and December 31, 2009, and must be eligible for COBRA.
• A special election period exists for individuals involuntarily terminated on or after last September 1 who had not elected COBRA.  They will have 60 more days after receiving the notice to elect coverage, which is retroactive to March 1 if they lost their jobs before then.
• The employer pays the 65 percent on the employee’s behalf and is then reimbursed through a payroll tax credit.  Large companies may be reimbursed either weekly or monthly, but smaller employers must file for the credit with their quarterly payroll taxes.
• The employee must pay 35 percent of COBRA before the employer can request reimbursement of the other 65 percent.  Employers that do not charge the full COBRA premium will not be entitled to reimbursement of 65 percent of the maximum COBRA premium.

 For more information, visit www.irs.gov/pub/irs-drop/n-09-27.pdf or www.dol.gov/ebsa/cobra.html

By NAPEO Staff
A little-discussed provision of the American Recovery and Reinvestment Act (ARRA) substantially expands whistleblower protections with regard to any activity by entities involved in the stimulus funds. Known as the McCaskill Amendment, Section 1553 extends to those contracting with entities receiving stimulus funds, even when only a portion of the activities are covered by the funds. The protection covers any disclosure by a person to a newly created oversight board, an inspector general, a government agency, a court, or a grand jury if the employee reasonably believes there is gross mismanagement of any agency contract or grant involving the funds, a gross waste of the funds, a substantial danger to public health or safety, an abuse of authority, or a violation of law, rule, or regulation. Protected disclosures will include those made in the ordinary course of an employee’s duties. The law prohibits waivers or releases of the rights and remedies in any agreement (including any pre-dispute arbitration agreement). Covered employers will be required to post notice of these rights.

On February 17, 2009, President Obama signed into law H.R. 1, the American Recovery and Reinvestment Act of 2009 (ARRA). Among many other provisions designed to encourage economic recovery, Title III of ARRA expands the federal Consolidated Omnibus Budget Reconciliation Act (COBRA) Continuation Coverage to provide a federal subsidy toward an eligible worker’s COBRA premium.

• The provisions in ARRA providing this subsidy are effective as of the date of the President’s signing.
• Eligible workers may receive a 65% subsidy toward their COBRA continuation premium for up to 9 months. Previously any individual enrolling in COBRA was responsible for 100% of the cost of the coverage, plus a 2% administrative fee.
• The Treasury Dept. will administer the subsidy, providing employers or health plans, if they administer COBRA benefits, with a credit against payroll taxes for the cost of the subsidy.
• The subsidy terminates the date the individual becomes eligible for any new employer-sponsored health plan or Medicare coverage.
• Individuals involuntarily terminated from employment between September 1, 2008 and December 1, 2009 and who have annual incomes less than $125k (single) or $250k (joint filers) for the taxable year in which the subsidy is received are eligible for the COBRA assistance, along with their families.
• Qualified individuals who initially decline COBRA coverage prior to ARRA will be given an additional 60 days after they receive notice of the special election period to elect to receive the subsidy.
• The special election opportunity is also available to a qualified beneficiary who elected COBRA coverage but who is no longer enrolled on the date of enactment of ARRA, for example, because the beneficiary was unable to continue paying the premium.
• COBRA notices must include information on the availability of the premium assistance and must be provided to all individuals who terminated employment during the applicable time period, not just individuals who were involuntarily terminated.

The Department of Labor has 30 days after the enactment of ARRA to issue model notices for use by employers.