IRS Issues Guidance on COBRA Subsidy

April 02, 2009

The American Recovery and Reinvestment Act of 2009 provides for a temporary federal subsidy of 65 percent of COBRA premium costs for "assistance eligible individuals" who become eligible for COBRA continuation coverage between September 1, 2008 and December 31, 2009 due to the involuntary termination of a covered worker.
 
On Tuesday, the IRS issued guidance intended to help employers comply with the provisions of the Act implementing the COBRA premium subsidy. Among other things, Notice 2009-27 attempts to clarify the meaning of "involuntary termination" for purposes of identifying "assistance eligible individuals," the proper method of calculating the premium reduction, the coverage eligible for the premium reduction, and the beginning and end of the premium reduction period. 

If you would like more information on the content of this alert, please contact Christine Burke Worthen, a shareholder and Chair of Eaton Peabody's Tax Practice Group, or Rodney A. Lake. 
 
This alert is provided as general information, and is not a substitute for legal or other professional advice.

To ensure compliance with requirements imposed by the U.S. Treasury Department and the Internal Revenue Service, we also inform you that any federal tax advice contained in this communication (including attachments) is not intended or written to be used, and cannot be used, for the purpose.