By: Melanie Berkowitz, Esq.
In response to questions from employers, the Internal Revenue Service (IRS) has issued additional guidelines about how to properly administer the new COBRA subsidy to their former employees as part of the American Recovery and Reinvestment Act (ARRA) -- and how to recover the cost of the subsidy on their tax returns.
Following previously released information about the COBRA subsidy and what it means for employers, the IRS update provides new information about what employers should be doing now to comply with the law.
In addition to their other recordkeeping and notice requirements, employers should maintain the following records with respect to the subsidy:
- Documentation that they have received each employee’s 35 percent share of the premium. Note: Employers may only claim reimbursement of the COBRA credit after they have received the 35% payment from the former employee.
- In the case of insured plans: A copy of invoice or other supporting statement from the insurance carrier and proof of timely payment of the full premium to the insurance carrier.
- A statement confirming the former employee’s involuntary termination.
The Department of Labor is (DOL) responsible for giving employers guidance about how to provide notice to former employees and what the notices must contain. The DOL website includes model notices that employers can use.
The IRS also provided additional guidance about how employers are to submit requests for reimbursement of the remaining sixty-five percent of each COBRA payment.
In mid-March, the IRS sent approximately 2 million employers IRS form 941, the Employer’s Quarterly Federal Tax Return, which is to be used to submit requests for premium reimbursement. The credit is claimed on line 12a of the revised form. Employers must report the number of former employees who were provided a COBRA subsidy on line 12b. Go to the IRS website to find more specific information on how to fill out form 941.
For a general summary of COBRA and the rights and responsibilities of employers and employees pursuant to the ARRA, including model notices employers can send to employees, see the Department of Labor’s COBRA website.
Monster will continue to update information about the COBRA subsidy and other aspects of the Recovery Act as they become available.