I got a call from my insurance agent today. He wanted to be sure that I knew about the new COBRA provisions in the stimulus package that went into effect a few weeks ago. The stimulus plan provides subsidized COBRA benefits to workers (and their families) who lose health care coverage because of involuntary termination of employment (read: if they got fired or laid off). This sounds like a wonderful benefit and one that many families will find valuable. But did anyone consider the impact on small businesses?
Under the law, 65% of COBRA premiums will be subsidized by the federal government, with the remaining 35% paid for the former employee. After receiving the reduced premium from the former employee, the employer or health plan offsets its payroll tax liability by the other 65 percent. If the offset amount does not cover the subsidy, the employer files paperwork with the government to get a refund.
Lots of employee benefits companies are covering this issue, including The Segal Group. Everyone is talking about the requirements, but did anyone consider the true impact on businesses, especially small businesses? And just think about this: small businesses will be responsible for new paperwork and fronting the COBRA premiums for former employees until they get reimbursed by the government. (more…)