COBRA CONFUSION
Posted: 26 February 2009 11:45 AM   [ Ignore ]
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I have read every article on elinfonet and I believe I understand what we have to do from an administration standpoint under the New COBRA stuff that came down last week, what I do not understand are:

1.  Under what circumstances is the insurance company to pay the 65% of the premium and under what circumstances is the employer to pay the 65%.

2. Employers can take a tax credit from FICA, but since FICA is credited to an individual employee, how does the employer take this credit? 

3 Is the best option to just apply to the Treasury Department for a rebate?  And if so, how is this done?

4. The accountants are telling me that this is a nightmare - is there any guidance yet for the bean counters?

Since this goes into effect in three day, people are getting a little nervous.

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Bob McKenzie
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Posted: 26 February 2009 12:32 PM   [ Ignore ]   [ # 1 ]
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This is based on information I received from my COBRA administrator and health insurance broker:

1. It was my understanding that the employer always pays the 65% to the insurance company. It may depend on how you are billed by the insurance company.  We have to pay all charges for plan participants and we are credited on the next billing cycle if someone drops coverage.  We have to track to make sure we are receiving a COBRA payment each month from anyone on COBRA. 

2. The employer is required to make up the balance by reducing its employment tax deposits (i.e., for federal income taxes, Social Security and Medicare) and reporting these offsets on a revised Form 941, which the IRS is currently finalizing. Two new lines (12a and 12b) have been added to Form 941 for reporting the amount of COBRA premium assistance payments and the number of subsidy recipients.

I don’t have answers for #3 and #4, but I hope that the above helps.

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Posted: 26 February 2009 12:34 PM   [ Ignore ]   [ # 2 ]
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I agree that it is a total nightmare. You might want to post your question on “linkedin” and get even more input.

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Posted: 26 February 2009 02:17 PM   [ Ignore ]   [ # 3 ]
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Regarding items 1 & 2: I don’t know of any broker, third party administrator, or insurance company who pays premiums for an employer. The 65% is the employers responsibility.  The employer can recoup the premium quarterly on the 941’s.

Regarding item 3: your CFO would be the person to determine whether it is best for the company to file quarterly or submit reimbursements to the Treasury Dept.  This issue could be looked at in 2 ways: 1) what is the cost of money over the period involved and is it of such significance to recoup it asap? or 2) what is administratively easier and is least costly to the company?  It seems to me filing quarterly is a faster way for the employer to recoup the money.

Regarding item 4: I can only sympathize with the accountants.

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Posted: 26 February 2009 02:53 PM   [ Ignore ]   [ # 4 ]
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Thanks all for the infomation.  I think I am starting to understand.

I just received this information from the IRS that may help as well.  They came up with a new 941 form with the COBRA credits included on the form.

Here’s the link - http://www.irs.gov/newsroom/article/0,,id=204505,00.html

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