American Recovery and Reinvestment Act of 2009: Provision of Premium Subsidy for COBRA Beneficiaries
On February 17, 2009, President Obama signed into law the American Recovery and Reinvestment Act of 2009. The Act establishes a temporary 65% federal subsidy of COBRA premiums payable by certain employees involuntarily terminated between September 1, 2008 and December 31, 2009. The subsidy, which is payable for up to nine months, is to be funded by the federal government through an offset against the employer's federal payroll taxes (wage withholding, Social Security and Medicare). The COBRA premium subsidy is designed to apply to all employers who maintain group health plans, even those not currently subject to the federal COBRA statute. The Act imposes notice and other administrative obligations on plan sponsors and administrators, and requires the Department of Labor to issue additional form notices and guidelines within the next 30 days.