Friday, March 6, 2009

Alert: Cobra medical coverage credit

As the unemployment rate continues to rise, hitting 8.1 percent in February, more glass company owners find themselves having to navigate IRS instructions on how to claim credit for the Cobra medical premiums of former employees.

Under the American Recovery and Reinvestment Act of 2009, eligible former employees enrolled in their employer's health plan at the time they first lost their jobs are now required to pay only 35 percent--as opposed to up to 102 percent--of the cost of Cobra coverage, according to a release from the Internal Revenue Service.

So who pays the other 65 percent? You guessed it: the employer. If your company has a group health plan that is subject to federal Cobra continuation coverage or similar state law requirements, and you receive a 35 percent payment from an "assistance-eligible employee," your company is responsible for paying the remaining 65 percent of the Cobra premium.

The good news is that employers can claim these subsidies as a credit on their quarterly payroll tax return. The IRS will send Form 941, the revised "Employer's Quarterly Federal Tax Return," to about 2 million employers in mid-March for companies to use when claiming the new Cobra premium assistance payments credit.

Detailed information on the new law, in effect as of Feb. 17, is available at For additional information on the Cobra medical coverage credit, in addition to an exhaustive Q&A on the subject, click here.

—By Jenni Chase, Editor, Glass Magazine

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