In general, COBRA provides certain former employees the right to a temporary continuation of health coverage at group rates.  As a result of the American Recovery and Reinvestment Act of 2009 (ARRA), employers are required to pay 65% of the former employee's COBRA premium directly to insurers, provided that the employee pays the remaining 35% of the premium.

 

Former employees are eligible for COBRA continuation coverage during the period beginning September 1, 2008 and ending December 31, 2009; however, the employee must have been INVOLUNTARILY terminated from employment.  In addition, the assistance for the coverage can only last up to 9 months.

The 65% of the premium paid by the employer is reimbursed through a credit against the employer's employment tax liabilities.  The credit is taken on Form 941 or Form 944 and is treated as a deposit made on the first day of the return period.

If any payments have been or will be made for former employees in the 4th quarter of 2009, the credit must be taken on the 4th quarter 2009 941 tax return.  Payments for the 4th quarter 2009 cannot be claimed on the 1st quarter 2010 941 tax return.  If you fail to claim the credit on the 4th quarter 941 tax return, form 941-X can be filed to retroactively claim the credit.

APS Customer Note:  To claim 4th quarter credits, please complete the COBRA Premium Assistance Credit form and submit it to your APS account manager prior to your last payroll of 2009. The form can be downloaded from the Main Menu of APS OnLine. 

 

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