Stimulus Package COBRA-The Short Story

Stimulus Package COBRA

The Short Story

Everyone who has employees and has or will have a ‘lay-off’ due to the economic conditions will be affected by this bill!

Laid-off workers will receive 65% of their COBRA or State Continuation[1] premium for up to 9 months if:

Ø They are or were laid-off between 9/1/2008 and 12/31/2009

Ø Their annual household income did not exceed $125,000 for individuals and $250,000 for families

Ø They were not terminated for cause

Ø They do not have another job with benefits

Subsidy benefits begin on March 1, 2009. A person who has been terminated between 9/1/2008 and 3/1/2009 has to be on COBRA on 3/1/09 to qualify and take advantage of this subsidy. Employees will quality for the subsidy if they are laid-off on or before 12/31/2009 and elect the COBRA coverage.

Any one eligible for COBRA benefits 9/1/2008 or after who declined the initial COBRA coverage can go back to their employer and request the benefits. This must be done timely – we would recommend by March 31, 2009. COBRA subsidy benefits will begin on 3/1/2009 and will not be retroactive. (This means a person could have a pre-existing condition under HIPAA if you were not covered under a medical insurance policy for more than 90-days in Georgia, 63-days in the remainder of the country.)

COBRA payments made prior to 3/1/2009 will not be subsidized.

Employers or their plan administrator will bill the former employee for 35% of the COBRA premium. When the former employee pays the 35%, within the current COBRA guidelines, to the employer, the employer will add the remaining 65%, paying 100% of the monthly premium to the insurance carrier.

The employer then subtracts the 65% they paid from their FICA expenses with documentation still to be determined.

If a person was terminated in August 2008 or before, they are not eligible for the subsidy.

If a person quit or was fired for cause (excessive absences, etc.) they are not eligible for the subsidy.

These same guidelines apply to State Continuation for employers with less than 20 employees who are exempt from COBRA. However, the benefits will last only 3-months per the Georgia State Continuation law and is not retro active like the COBRA laws are.


[1] State Continuation employees would be entitled to 3-months subsidy

Guest Contributor:

Victoria J. Braden


Braden Benefit Strategies, Inc.

experts providing employee benefit solutions

11555 Medlock Bridge Road, Suite 160

Johns Creek, GA  30097

770-447-9843 or 800-353-0272

©Braden Benefit Strategies, Inc. All Rights Reserved 2009

770-447-9843 or 800-353-0272

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