Stimulus plan brings COBRA changes

Stimulus plan brings COBRA changes

Government is subsidizing premiums, but employers pay up front
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Mar 30, 2009

As part of President Obama’s new stimulus package, the government is helping people pay their health insurance premiums if they become unemployed. For employees, this great news; the federal government is subsidizing 65 percent of their COBRA (Continuation of Benefits Relief Act) premiums if they’re involuntarily terminated between September 1, 2008, and December 31, 2009. (The new provisions became effective March 1, 2009.) Employees qualify if they’re single and earn up to $125,000 or married and earn up to $250,000.

If you’re an employer such as an owner of a veterinary practice, you’re responsible for covering the 65 percent premium payment, which will then be offset by a payroll tax credit you receive quarterly by completing IRS Form 941.

The biggest downside for employers is the administrative hassles this legislation produces. Employers and former employees will have to coordinate how to receive payments and handle billing from former employees. If payroll reporting wasn’t difficult before, it sure will be now. If you are not using an outside payroll service, now may be a great time to consider one. Check out the new rules for these provisions and other tax law changes at irs.gov.

Gary Glassman, CPA, is a partner with Burzenski and Co. in East Haven, Conn., and a member of Veterinary Economics' Editorial Advisory Board.

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