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HR and Tax Newsletter - MARCH 2009

Drastic Change to COBRA laws

Effective March 1, 2009, most individuals eligible for COBRA only have to pay 35% of the normal COBRA premium. Employers initially absorb the cost difference; but are then reimbursed by a payroll tax credit.

The subsidy varies by income level. The full subsidy goes to those with adjusted gross income up to $125,000 ($250,000 for joint filers). Employees, spouses and dependents who become eligible for COBRA between September 1, 2008, and December 31, 2009 are covered.

Employers must give notice of the subsidy. The Labor Department is supposed to provide a model notice by March 19, 2009.