Guidance on New COBRA Rules From The IRS And Doeren Mayhew
The bureau recently free guidance, in a question and respond format, addressing how employers are to lot and essay recovery of the new COBRA payment subsidy enacted under the American ecovery and Reinvestment Tax Act of 2009 (P.L. 111-5). The Act provides that an individual who has been involuntarily terminated on or after September 1, 2008, through the end of 2009 is required to clear only 35% of the group health shelter payment to bonded COBRA continuation coverage (up to nine months).
The new guidance focuses on two broad areas: Form preparation - the mechanics of how an employer recovers the COBRA premium subsidy through a payroll credit claimed on IRS Form 941, and administration and eligibility. The guidance also addresses common inquiries surrounding the timing of when the subsidy begins and ends.
How the Subsidy Works: A former employee and his or her family are "assistance eligible employees" if they are eligible for COBRA health insurance continuation coverage as a result of any involuntary termination occurring from September 1, 2008, through December 31, 2009. These individuals are required to pay only 35% of the group health insurance premium that would otherwise apply.
Under the IRS Act, the "person to whom the premiums are payable" - generally, the employer - pays the other 65% of the COBRA continuation premium. The employer module then be reimbursed by means of a federal payroll tax credit claimed on Form 941.
The Payroll Credit Generally, an employer can claim the payroll credit for the COBRA payment subsidy on Form 941, Employer's Quarterly Federal Tax Return. To do so, the employer should enter the amount of any COBRA payment assistance payments paid on behalf of employees for that lodge on Line 12a. The amount entered should equal 65% of suitable workers' total COBRA payment payments - not amounts received from past employees.
In the IRS Guidance, the IRS indicated that there has been some confusion surrounding the proper number of individuals to be reported on Line 12b as having received COBRA premium assistance reported on Line 12a. The guidance clarifies that only one individual should be counted for Line 12b purposes in a situation where a former employee has also secured coverage for other qualifying individuals such as a spouse and/or children.
Clarification has come that the COBRA premium reduction applies as of the first period of coverage beginning on or after February 17, 2009, for which a qualifying involuntary terminated employee is eligible to pay 35% of the premium. The exact date of coverage is contingent upon the period to which premiums are charged to the plan. The 35% premium subsidy generally applies until the earliest of three events: (1) when the former employee secures other health insurance coverage; (2) the date that is nine months after the first day of the first month for which the special COBRA premium subsidy provision applies; or (3) the date the individual is no longer eligible for COBRA continuation coverage. - 23200
The new guidance focuses on two broad areas: Form preparation - the mechanics of how an employer recovers the COBRA premium subsidy through a payroll credit claimed on IRS Form 941, and administration and eligibility. The guidance also addresses common inquiries surrounding the timing of when the subsidy begins and ends.
How the Subsidy Works: A former employee and his or her family are "assistance eligible employees" if they are eligible for COBRA health insurance continuation coverage as a result of any involuntary termination occurring from September 1, 2008, through December 31, 2009. These individuals are required to pay only 35% of the group health insurance premium that would otherwise apply.
Under the IRS Act, the "person to whom the premiums are payable" - generally, the employer - pays the other 65% of the COBRA continuation premium. The employer module then be reimbursed by means of a federal payroll tax credit claimed on Form 941.
The Payroll Credit Generally, an employer can claim the payroll credit for the COBRA payment subsidy on Form 941, Employer's Quarterly Federal Tax Return. To do so, the employer should enter the amount of any COBRA payment assistance payments paid on behalf of employees for that lodge on Line 12a. The amount entered should equal 65% of suitable workers' total COBRA payment payments - not amounts received from past employees.
In the IRS Guidance, the IRS indicated that there has been some confusion surrounding the proper number of individuals to be reported on Line 12b as having received COBRA premium assistance reported on Line 12a. The guidance clarifies that only one individual should be counted for Line 12b purposes in a situation where a former employee has also secured coverage for other qualifying individuals such as a spouse and/or children.
Clarification has come that the COBRA premium reduction applies as of the first period of coverage beginning on or after February 17, 2009, for which a qualifying involuntary terminated employee is eligible to pay 35% of the premium. The exact date of coverage is contingent upon the period to which premiums are charged to the plan. The 35% premium subsidy generally applies until the earliest of three events: (1) when the former employee secures other health insurance coverage; (2) the date that is nine months after the first day of the first month for which the special COBRA premium subsidy provision applies; or (3) the date the individual is no longer eligible for COBRA continuation coverage. - 23200
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Visit Doeren Mayhew online for more information. Doeren Mayhew is located in Troy, Michigan.
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