As employers shift their focus with regard to the COBRA subsidy rules introduced by the American Recovery and Reinvestment Act of 2009 (ARRA) from the implementation to the administration of compliance programs, the federal government continues to issue useful guidance.

The Department of Labor and Department of Health and Human Services have each published information and forms regarding an individual's right to appeal an employer's decision to deny the individual a reduction in the COBRA premium under ARRA. These materials may be found by clicking here and here.
On June 4, the IRS added new entries to its FAQ guidance on the COBRA subsidy rules that address a number of issues of concern to employers. For example:

  • In considering whether an employer is entitled to a payroll tax credit for a terminated employee, the IRS will not challenge the employer's determination that an employee's termination was involuntary as long as the determination is consistent with a reasonable interpretation of ARRA's statutory provisions and applicable IRS guidance.
  • An employer must retain appropriate documentation of its determinations that includes a statement by the former employee or employer that the employee was involuntarily terminated. Forms requesting treatment as an assistance-eligible individual may be used for this purpose.
  • In situations where one employer maintains a plan on behalf of related employers in the same controlled group, each of the employers will be viewed as a separate employer for payroll tax purposes. The payroll tax credit must be appropriately allocated among them. There is at least one exception to this requirement. In certain circumstances, one state agency that maintains a plan can claim the credit for other state and local government agencies that participate in the plan.
  • The COBRA subsidy rules will not require any additional Form W-2 reporting.

For discussions on the fundamentals and other aspects of the COBRA subsidy rules under ARRA, please see our alerts dated February 17, 2009, March 20, 2009, and April 2, 2009.

Our Employee Benefits and Executive Compensation Group can assist employers and plan administrators in regard to the COBRA subsidy rules introduced by ARRA.


Copyright © 2009 by Ballard Spahr LLP.
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This newsletter is a periodic publication of Ballard Spahr LLP and is intended to alert the recipients to new developments in the law. It should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general informational purposes only, and you are urged to consult your own lawyer concerning your situation and specific legal questions you have.