COBRA Premium Subsidy Questions

[rocknrolls2]

I have the following questions concerning the application of the COBRA premium subsidy:

(1) Company maintains a medical plan for its employees. Bill works for Company and participates in its medical plan. Bill's wife Karen works for Another Company and participates in its medical plan. In March, 2009, Bill is involuntarily terminated from Company. At all times, Bill was eligible to be covered as a dependent under Karen's medical plan but had not done so prior to losing his job. Under these circumstances, does Company have to provide Bill with COBRA? Does Company have to provide Bill with the COBRA premium subsidy?

Based on my reading of the legislative language and the Conference Committee report, in my view, the answer should be that Bill should be offered COBRA but that the COBRA subsidy would not be available to him because he is eligible to participate as a dependent in Karen's medical plan. Prior to ARRA COBRA permits employers to cut off COBRA if an individual becomes enrolled in another group health plan after electing COBRA. My reading of the COBRA premium subsidy rules is that the COBRA subsidy does not even have to be offered if one is eligible to participate in another group health plan on or before the qualifying event. Therefore, the answer to the first question should be yes and the second question should be answered no. Anyone disagree?

(2) Company maintains a medical plan for its employees. Bill works for Company and participates in its medical plan. Assume that Company also maintains a severance plan for certain involuntarily terminated employees which, prior to ARRA, provided for a COBRA subsidy for 6 months equal to the employer's portion of the cost of coverage while the employee was active. As a result of ARRA, Company decides to restructure the severance plan to provide for a COBRA subsidy determined under the ARRA provisions. However, if an employee files a waiver, the employee will become entitled to the preior COBRA subsidy but only if s/he signs a separation agreement which has become final. Assume that Bill's adjusted gross income, after taking the severance pay into account will cause his adjusted gross income for the year to exceed $290,000. Bill therefore decides to waive the ARRA subsidy and negotiates a separation agreement with Company providing for the higher COBRA subsidy for up to the first 6 months following his termination of employment. Is the COBRA subsidy provided to Bill taxable?

Based on my reading of the legislative language and Committee report, the answer should be no because the income limitation applies solely to subsidized COBRA provided "under this section" and does not extend to any COBRA subsidy negotiated as part of a severance agreement after the subsidy is waived. Anyone have any different views on this?

[oriecat]

(1) Company maintains a medical plan for its employees. Bill works for Company and participates in its medical plan. Bill's wife Karen works for Another Company and participates in its medical plan. In March, 2009, Bill is involuntarily terminated from Company. At all times, Bill was eligible to be covered as a dependent under Karen's medical plan but had not done so prior to losing his job. Under these circumstances, does Company have to provide Bill with COBRA? Does Company have to provide Bill with the COBRA premium subsidy?

Based on my reading of the legislative language and the Conference Committee report, in my view, the answer should be that Bill should be offered COBRA but that the COBRA subsidy would not be available to him because he is eligible to participate as a dependent in Karen's medical plan. Prior to ARRA COBRA permits employers to cut off COBRA if an individual becomes enrolled in another group health plan after electing COBRA. My reading of the COBRA premium subsidy rules is that the COBRA subsidy does not even have to be offered if one is eligible to participate in another group health plan on or before the qualifying event. Therefore, the answer to the first question should be yes and the second question should be answered no. Anyone disagree?

This is now shown on the DOL COBRA website. http://www.dol.gov/ebsa/newsroom/fsCOBRApr...mreduction.html

"Those who are eligible for other group health coverage (such as a spouse's plan) or Medicare are not eligible for the premium reduction." So, yes I agree.