COBRA Health Insurance Continuation Premium Subsidy
Update Jan. 21, 2015: The COBRA premium assistance credit was available to an employer for premiums paid on behalf of employees who were involuntarily terminated from employment between Sept. 1, 2008 and May 31, 2010. The COBRA premium assistance credit is not available for individuals who were involuntarily terminated after May 31, 2010. Therefore, only in rare circumstances, such as instances where COBRA eligibility was delayed as a result of employer-provided health insurance coverage following termination, will the credit be available.
The Recovery Act established an employer-provided health insurance continuation subsidy for workers who involuntarily lost their jobs between Sept. 1, 2008, and March 31, 2010. This subsidy was extended through May 31, 2010.
The U.S. Department of Labor website also contains information on this subsidy.
See these resources:
- IR-2009-15, IRS Releases Information to Help Employers Claim COBRA Medical Coverage Credit on Payroll Tax Form.
- Questions and answers on how to administer the COBRA continuation premium subsidy to former employees.
- Notice 2009-27, Premium Assistance for COBRA Benefits.
Employers should use the updated:
- Form 941-X, Adjusted Employer's Quarterly Federal Tax Return or Claim for Refund to report their COBRA premium assistance payments.
- Form 941-X Instructions, which explain how to complete lines 19a and 19b, which address the COBRA premium assistance payments.
Small employers that file Form 944, Employer’s ANNUAL Federal Tax Return — generally those with an estimated employment tax liability of $1,000 or less in the calendar year — may claim their COBRA credit on Form 944-X. Additionally, agricultural employers may claim the COBRA credit on Form 943-X, Adjusted Employer’s Annual Federal Tax Return for Agricultural Employees or Claim for Refund.
Employees and Former Employees
If You Lost Your Job between Sept. 1, 2008, and May 31, 2010
The Recovery Act provides eligible workers who lost their jobs between Sept. 1, 2008, and May 31, 2010, with a 65 percent subsidy for COBRA continuation premiums for themselves and their families for up to 15 months.
- Eligible workers pay 35 percent of the premium to their former employers.
- To qualify you must have been involuntarily separated from your job between Sept. 1, 2008, and May 31, 2010.
- This subsidy is reduced if your filing status is single and your modified adjusted gross income exceeds $125,000 ($250,000 if you file a joint return). If your modified adjusted gross income exceeds $145,000 ($290,000 for joint filers), you do not qualify for the subsidy.
If Your Hours Were Reduced
In addition, the COBRA subsidy is available to people who become eligible for COBRA coverage as a result of a reduction in hours occurring between Sept. 1, 2008, and May 31, 2010, followed by an involuntary termination between March 2, 2010 and May 31, 2010. If you fall into this category, your subsidy is available starting with the first period of coverage beginning after the involuntary termination.
Individuals who did not take COBRA coverage after the reduction in hours or who signed up but later dropped it, get another chance to sign up for COBRA coverage. In this case, the COBRA coverage would begin with the first period of coverage after the involuntary termination and continue up to 18 months after the reduction in hours. The administrator of a group health plan or other entity must provide notice of the new election right after the involuntary termination. As in the case of other assistance-eligible individuals, the subsidy ends after the earliest of 15 months, the end of COBRA coverage, or eligibility for other group health or Medicare coverage.
Questions and Answers
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