Vision Payroll

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 explained how state agencies should allocate the COBRA premium reduction credit. Often a single state agency may provide health care coverage to employees of several other state agencies and local government units. Generally, the credit is attributed to the agency or unit that was the former employer whose termination of the employee made the employee eligible for the subsidy. When a plan is subject to COBRA under the Public Health Services Act (PHSA) and the former employee is required to pay the thirty-five percent share directly to the agency that maintains the health plan, however, that agency may claim the credit as long as it has received notification that the former employee was involuntarily terminated and that the former employing agency will not claim the credit. Contact Vision Payroll if you have any questions on the COBRA premium reduction credit.

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.

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 explained that when a group health plan covers employees of two or more unrelated employers, then 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.

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 confirmed that employers, multiemployer plans, and insurers are not required to report on Form W-2 or Form 1099 any premium subsidies provided to Assistance Eligible Individuals (AEIs). They are requited to keep records and supporting documentation for any such payments to AEIs and to support any credit claimed on Form 941. Contact Vision Payroll if you have any questions on the COBRA premium reduction credit.

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 explained that when insurers or multiemployer plans are entitled to claim the COBRA premium reduction credit, they should obtain a statement from the employee or the employee’s former employer. A properly completed form, Request for Treatment as an Assistance Eligible Individual may be used as the required statement and maintained along with the employer’s name and address. Barring “fraud, malfeasance or misrepresentation of a material fact” or knowledge of or reason to know of the same, the IRS will not challenge the treatment of the former employee by insurers and multiemployer plans as involuntarily terminated. Contact Vision Payroll if you have any questions on the COBRA premium reduction credit.

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 provided information for an employer who has elected to file Form 2678, Employer/Payer Appointment of Agent. In such situations, the employer does not file Form 941; the agent files Form 941 using its own employer identification number. If the employer is entitled to claim a credit, the agent should claim the credit on its Form 941 and reduce the amount of taxes paid on behalf of the employer. The employer should not file a zero Form 941 showing only the credit as a refundable amount. Contact Vision Payroll if you have any questions on the COBRA premium reduction credit.

The Internal Revenue Service (IRS) has updated its instructions for Form 941, Employer’s QUARTERLY Federal Tax Return. Using the new guidance, employers are now instructed to report on line 12a “65% of the COBRA premiums for assistance eligible individuals” (AEIs). Previously, employers were instructed to report “COBRA assistance payments [they] made.” Also, the IRS clarified that when entering the number of AEIs provided COBRA premium assistance, reach AEI who paid a premium should count as one individual even if the premium was for a policy that covered more than one AEI. Contact Vision Payroll if you have any questions on the revised Form 941 reporting instructions.

This week’s question comes from Rosa, a business owner. I paid over $5,000 in premiums for former employees who are eligible for the COBRA premium subsidy. The reduction in the federal tax deposit was only about $3,000. Why is my COBRA credit limited? Answer: 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 credit on their Form 941 to be reimbursed for the assistance provided. Vision Payroll will limit the amount of the credit utilized to offset any particular payroll’s liability to the total of the federal tax deposit for that payroll. Credits in excess of that payroll’s federal tax deposit will be limited and the overage will be used to offset future liabilities for that quarter, unless the payroll is the last of the quarter. Contact Vision Payroll if you have any questions on the COBRA premium subsidy.

This week’s question comes from Sandy, an HR manager. We’ve just had our first employee sign up to receive the COBRA premium subsidy. What information do we need to keep to document the COBRA credit? Answer: Employers reimbursing employees for 65% of the eligible COBRA continuation premium must maintain specific documentation. This information is not to be submitted with the Form 941, Employer’s QUARTERLY Federal Tax Return, but must be maintained and presumably presented to the Internal Revenue Service or Department of Labor upon request. The required information is:

1. Information on the receipt, including dates and amounts, of the assistance eligible individuals’ 35% share of the premium.
2. In the case of an insured plan, copy of invoice or other supporting statement from the insurance carrier and proof of timely payment of the full premium to the insurance carrier required under COBRA.
3. In the case of a self-insured plan, proof of the premium amount and proof of the coverage provided to the assistance eligible individuals.
4. Attestation of involuntary termination, including the date of the involuntary termination (which must be during the period from September 1, 2008, to December 31, 2009), for each covered employee whose involuntary termination is the basis for eligibility for the subsidy.
5. Proof of each assistance eligible individual’s eligibility for COBRA coverage at any time during the period from Sept. 1, 2008, to Dec. 31, 2009, and election of COBRA coverage.
6. A record of the social security numbers of all covered employees, the amount of the subsidy reimbursed with respect to each covered employee, and whether the subsidy was for one individual or two or more individuals.
7. Other documents necessary to verify the correct amount of reimbursement.

Earlier posts have discussed the COBRA premium subsidy in further detail. Click the COBRA tag for more information or contact Vision Payroll.

This week’s question comes from John, an HR Director. We need to send COBRA notices to terminated employees. Are model notices available for the COBRA premium reduction? Answer: The American Recovery and Reinvestment Act of 2009 (ARRA) made changes to the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) continuation health coverage. In certain situations, employers must pay 65% of the continuation premium and take a credit on Form 941, Employer’s QUARTERLY Federal Tax Return. The US Department of Labor recently announced the availability of model notices for use in four different situations.

The first notice is the General Notice (full version). Plans subject to the Federal COBRA provisions must send the General Notice to all qualified beneficiaries, not just covered employees, who experienced a qualifying event at any time from September 1, 2008 through December 31, 2009, regardless of the type of qualifying event, AND who either have not yet been provided an election notice or who were provided an election notice on or after February 17, 2009 that did not include the additional information required by ARRA. This full version includes information on the premium reduction as well as information required in a COBRA election notice.

The second notice is the General Notice (abbreviated version). The abbreviated version of the General Notice includes the same information as the full version regarding the availability of the premium reduction and other rights under ARRA, but does not include the COBRA coverage election information. It may be sent in lieu of the full version to individuals who experienced a qualifying event during on or after September 1, 2008, have already elected COBRA coverage, and still have it.

The third notice is the Alternative Notice. Insurance issuers that provide group health insurance coverage must send the Alternative Notice to persons who became eligible for continuation coverage under a State law. Continuation coverage requirements vary among States, and issuers should modify this model notice as necessary to conform it to the applicable State law. Issuers may also find the model Alternative Notice or the abbreviated model General Notice appropriate for use in certain situations.

The final notice is the Notice in Connection with Extended Election Periods. Plans subject to the Federal COBRA provisions must send the Notice in Connection with Extended Election Periods to any assistance eligible individual (or any individual who would be an assistance eligible individual if a COBRA continuation election were in effect) who:

1. Had a qualifying event at any time from September 1, 2008 through February 16, 2009; and
2. Either did not elect COBRA continuation coverage, or who elected it but subsequently discontinued COBRA.

This notice includes information on ARRA’s additional election opportunity, as well as premium reduction information. This notice must be provided by April 18, 2009.

Contact Vision Payroll if you have any questions on the COBRA model notices.