On December 21 President Obama signed a measure extending the COBRA subsidy program, which pays 65 percent of health care premiums for involuntarily terminated workers. The measure, called The Fiscal Year 2010 Defense Appropriations Act, includes amendments to the federal American Recovery and Reinvestment Act of 2009 that originally provided the COBRA subsidy. The measure increases the duration of the program from nine to 15 months, and extends premium assistance to individuals who lose health care coverage because of an involuntary employment termination from Sept. 1, 2008, to Feb. 28, 2010. 

 

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.

Claiming Credits  

If any payments have been or will be made for former employees in 2010, the credit must be taken on the 2010 quarterly 941 tax return in which the payments are made.  If you fail to claim the credit on appropriate 941 tax return, a form 941-X can be filed to retroactively claim the credit.

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.

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

 

The links provided are for informational purposes only and are not meant to be an endorsement or representation by APS.