IMPORTANT E-ALERT UPDATE ON COBRA AMENDMENTS

As we previsouly reported in our last alert, the new COBRA amendments imposed several obligations on employers, which included administering the premium subsidy.  Employers were expected to comply with this new law immediately without much guidance.  In the two weeks since the COBRA amendments took effect, there has been considerable confusion, especially among not-for-profit organizations, over when and how employers will be reimbursed from the federal government for fronting 65% of employees’ COBRA premiums.  Just yesterday, the Department of Labor offered some preliminary guidance on how the COBRA subsidy should be handled by employers.  This preliminary information can be found on the DOL’s website at http://www.dol.gov/ebsa/cobra.html.  The information is not very comprehensive at this point; however, the DOL notes that more detailed guidance will follow and encourages individuals to sign up for email alerts, which will notify them as additional guidance becomes available. 

Additionally, the Internal Revenue Service has posted information about the COBRA amendments on their website, which includes a revised tax form for businesses to use.  According to the IRS, employers will be reimbursed for their subsidy payments on a quarterly basis.  Since employers are fronting the COBRA premiums, it is advisable to keep detailed records of these payments, such as the amounts paid and to whom and whether the payments were for a single or family plan.   The IRS information can be accessed at http://www.irs.gov/newsroom/article/0,,id=204505,00.html. 

We will continue to provide you with information about the COBRA amendments as it develops.  If you have any questions about the COBRA amendments, or need assistance in bringing your business into compliance with the new law, please contact Amy B. Royal at (413) 586-2288 or at aroyal@rkesq.com.