Update Dec. 16: House Passes COBRA Subsidy Extension and Expansion
Even as President Barack Obama prepares for a trip to Denver Tuesday to sign the American Recovery and Reinvestment Act of 2009, better known as the stimulus package, many are still trying to sort out the bill, which Congress passed last Friday in dizzyingly rapid fashion.
The stimulus bill is intended to save or create 3.5 million jobs over the next two years, according to Christina Romer, chair of the Council of Economic Advisers. To that end, it includes tax cuts and spending programs, both of which will affect HR managers. Here’s a brief rundown.
Free White Paper from HRhero.com: What the Stimulus Plan Means for Employers: COBRA, Benefits, and More
Health care continuation
The Congressional conference committee bill contains a nine-month, 65% federal subsidy to premium payments that eligible laid-off employees would need to make to continue health insurance under COBRA. Employees must have been laid off between September 1, 2008, and December 1, 2009, to qualify for the subsidy, and they must certify that their income is no more than $125,000 for individuals and $250,000 for families. Employees who have already been laid off but chose not to sign up for COBRA coverage have 60 days to do so.
COBRA, as it currently stands, entitles eligible employees to 18 months of continued coverage, but employees must pay the full amount of premiums plus a 2% administrative fee. Gone from the conference committee measure are provisions in the original U. S. House of Representatives bill that would have allowed workers 55 and older and certain longtime employees to stay on COBRA at full price until they became eligible for Medicare, along with a provision in the House bill that would have allowed states to extend Medicaid to the unemployed.
Audio Conference: Effective Immediately: How the Stimulus Package Changes COBRA
Health care changes
The stimulus package sets aside $19 billion to computerize health records and another $1.1 billion for health care effectiveness research. The provision on computerized health records adds privacy protections, including a ban on providers selling individually identifiable health information without the patient’s permission. More privacy issues may be identified as details of those provisions become better understood.
Funding for preventive health measures and treatment of chronic conditions may yield cost savings over the long term.
Unemployment benefits
The stimulus package continues through December 2009 the extended unemployment benefits program (which provides up to 33 weeks of extended benefits) that otherwise was scheduled to begin to phase out at the end of March 2009. Some 20 million jobless workers would receive an additional $25 per week in unemployment benefits. News reports indicate that those receiving unemployment benefits this year wouldn’t pay any federal income taxes on the first $2,400 they receive.
Payroll issues
Be prepared to change your federal income tax-withholding systems to allow employees to receive additional money in each paycheck under the stimulus package’s tax cuts starting in June.
Whistleblower protection
State workers who report fraud and abuse are protected.
Pension issues
The ERISA Industry Committee (ERIC) has said the conference committee measure failed to include relief for defined benefit pension plans from funding requirements of the Pension Protection Act. The plans received some relief under legislation passed late last year, but ERIC contends more is needed as the value of the investments has declined.
There are many more details your organization needs to consider and act on, so you’ll need to work with experienced benefits counsel, your providers, and administrators. For a more detailed summary of the COBRA subsidy check the March issues of Benefits & Compensation Law Alert.
Read more about the COBRA subsidy and a possible extension to the program