Thursday, April 23, 2009

How do the Changes to COBRA Benefits Affect You the Business Owner...

The Obama administrations' stimulus packages made some changes to COBRA to provide some relief to the millions of laid off employees in need of continued health care coverage. The Internal Revenue Service recently issued Notice 2009-27 to clarify the changes in COBRA benefits. Notice 2009-27 provides an in-depth clarification of the changes, but the bottom line is that the government decided to subsidize sixty-five percent (65%) of COBRA premiums for eligible employees who are involuntarily laid and seeking extended health care coverage through the employers COBRA plan. For small business owners it is important to note that the employer must advance the cost of the premiums and then receive reimbursement through a payroll tax credit. In other words, you are temporarily subsidizing the government’s subsidy. These are extremely tough economic times for all businesses, and this scenario could prove to be taxing on your already tight cash flow. This is something to keep in mind when contemplating terminating any eligible employees.


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