On Tuesday, President Obama signed the $787 billion American Recovery and Reinvestment Act of 2009. Obama called the package the “first part” of a larger strategy to help give the nation’s economy a boost. While some of the finer details are still being worked out, the package does include benefits that employers and employees alike should know about.
COBRA Subsidy
Certain employees affected by an involuntary termination (including a layoff) between September 1, 2008 and January 1, 2010 will be eligible to receive a 65% subsidy on COBRA premiums. The 65% premium subsidy will be paid directly to employers in the form of a payroll tax credit.
Employees who lose their jobs due to foreign competition will also be eligible for the subsidy if their former employer has applied for relief under the Trade Act of 2002. The subsidy is available until the employee becomes eligible for another employer-sponsored health plan or for a period of nine months—whichever comes first. Employees who earn more than $145,000 (or $250,000 for couples) per year are not eligible for the subsidy.
Workers will be able to begin signing up for the subsidy on March 1, 2009. COBRA notices, which employers are required to provide to departing employees, will need to include information about the new subsidy. Within the next 30 days, the U.S. Department of Labor plans to draft a model notice. We’ll make a copy of the notice available to our CEA Online subscribers as soon as it’s released.
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Unemployment Benefits and Tax Credits
The stimulus package also extends for nine months a program that provides workers with an additional seven weeks of unemployment insurance benefits, and increases weekly unemployment checks by $25 (federal involvement in funding of unemployment benefits will end after March 10, 2010). In addition, employees will owe no federal income tax on the first $2,400 of unemployment insurance funds they receive.
Workers making less than $75,000 ($150,000 for couples) will also be getting tax credits—up to $400 per individual/$800 per couple—to be doled out on a weekly basis beginning around June of this year. The credit will amount to roughly an additional $13 per week, and will show up in employee paychecks in the form of a reduced federal income tax withholding. Workers making $75,000-$95,000 ($150,000-$190,000 for couples) will receive a prorated credit amount.
The Employ American Workers Act
The stimulus package also includes the Employ American Workers Act, which forbids employers who receive funding under the Troubled Assets Relief Program (TARP) from hiring additional H1-B foreign workers unless the employer has complied with the H1-B “dependent employer” rules. TARP is a program started in 2008 to provide assistance to certain companies in financial trouble. Employers receiving TARP funding will have to attest that no U.S. worker in an equivalent position has been laid off during the 90-day period prior to filing an H1-B petition to hire a foreign worker.
We’ll have a complete rundown on how the stimulus package affects employers in a future issue of California Employer Advisor.