COBRA Premium Reduction in the Recovery Act

The American Recovery and Reinvestment Act of 2009 (ARRA) includes a provision for COBRA premium reductions under which individuals are responsible for paying only 35% of the COBRA premium for the period of coverage. The remaining 65% of the premium is reimbursed directly to the employer, plan administrator, or insurance company through a payroll tax credit.

ARRA mandates that plans notify certain current and former participants and beneficiaries about the premium reduction. The Department of Labor has released model notices to employees about these changes to assist employers in complying with the notification requirement.

On April 1, 2009, the IRS released a helpful document which answers some of the most frequently asked questions about the measures in the American Recovery and Reinvestment Act which provide premium assistance to individuals with COBRA continuation coverage. In particular, the document contains additional clarification on what is considered involuntary termination. Get the document

Workshops and Trainings on COBRA Premium Reduction

• The U.S. Department of Labor held a webcast on Tuesday, March 24 to help employers understand the changes in COBRA administration. Listen to the archived webcast (free registration required).

Other Resources

• U.S Department of Labor press release and FAQ on COBRA subsidy
• Additional information from Department of Labor on COBRA subsidy

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