Page 42 - MetalForming July/August 2009

Doug Ehlke, a national board- certified civil trial lawyer, has for more than 20 years represented metalforming companies in OSHA litigation and in labor- union elections. His law practice emphasizes labor law, personal injury, product liability, probate, estate planning and environ- mental and employment discrimination law.
Ehlke Law Offices
28840 11th Avenue South Federal Way, WA 98003-3705 Phone: 253/839-5555
Fax: 253/874-5475
E-mail: dehlke@ehlkelaw-
offices.com
Just when you thought you knew everything about Cobra, the Ameri- can Recovery and Reinvestment Act of 2009 (what we all know to be the “stimulus bill” that was finally signed into law) came along and added new wrinkles. These wrinkles are, for the most part, good for employees, and not so good for employers.
Most employees think of Cobra the same way—health insurance is afford- able when their employer pays for it, but it becomes ridiculously expensive once the employee is no longer with the com- pany and has to pay for it directly. These new changes seek to provide relief to former employees in such a situation.
The new law reduces the amount of premiums to be paid by former employ- ees who were involuntarily terminated (defined for this purpose to mean an employer-initiated termination where the employee was willing and able to continue performing services). While the difference is ultimately made up by the government, employers are required to “front” the difference, then obtain reimbursement in the form of an offset to payroll taxes.
Here is how it works. In cases where a former employee was required to pay 100 percent (102 percent actually) of the premium, the stimulus law provides that the former employee pay only 35 percent of the premium. The employer must “front” the other 65 percent. The employer does get all of this 65 percent back, in the form of payroll tax credits. The employer gets a 1:1 tax credit against all payroll taxes. For employers who will pay more in payroll taxes than the total of the 65 percent of premiums, this is really only an accounting issue—
payroll taxes withheld can be used to pay these premiums rather than be set aside to actually pay the taxes. The most affected employers are those where the 65-percent premiums will exceed pay- roll taxes. In such a case, the employer has to front the 65 percent, and will receive reimbursement in the form of a check from the government, which could take a little time.
For whatever reason, the law pro- vides that the employer may only receive a credit for the 65 percent if the former employee has paid the 35 percent. Therefore, employers want to make cer- tain that the former employee has paid the 35 percent before the employer pays the 65 percent.
The subsidy is available for up to nine months, but will end sooner if the Cobra coverage expires. The law does not extend the coverage period.
Covered employees (known as “assis- tance-eligible individuals”) include any- one who was involuntarily terminated between September 1, 2008 and Decem- ber 31, 2009, even if they have already elected not to obtain Cobra coverage. In other words, employees who already passed up the coverage, possibly because of the cost, now have another chance to elect such coverage. However, former employees will not be eligible for this subsidy if they become eligible for cov- erage under any other group health plan, Medicare or Medicaid. Also, indi- viduals with an adjusted gross income of $125,000 or more ($250,000 if married filing jointly), while eligible for the sub- sidy, will pay taxes equal to any subsidy received, completely negating any ben- efit from the subsidy.
All employers were supposed to have
40 METALFORMING / JULY/AUGUST 2009
www.metalformingmagazine.com
YOU & THE LAW DOUGLAS B.M. EHLKE
Changes to Cobra Based on the American Recovery and Investment Act of 2009