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Department of Labor and Internal Revenue Service Publish COBRA Subsidy Guidance

Employee Benefits Update J. Paul Jacobson, Robert D. Rothacker, David P. Olson, Sarah M. Linsley

On Thursday, February 26, 2009, the Department of Labor and the Internal Revenue Service published additional guidance related to COBRA continuation coverage assistance under the American Recovery and Reinvestment Act of 2009.

The Department of Labor has provided a COBRA premium reduction fact sheet, as well as flyers and posters describing the premium reduction. The fact sheet describes the basic provisions of the premium reduction, including which terminated employees are eligible for the premium reduction, the special election opportunity for people who were previously involuntarily terminated, and the income limits for those receiving the subsidy. Our previous client alert, "Final Stimulus Bill Includes Significant Changes to COBRA Coverage," describes the basic provisions of the premium reduction and the employer subsidy. The Department of Labor information is available at:

The Internal Revenue Service has provided a series of questions and answers to guide employers in understanding how to claim the payroll tax credit for the subsidy. The information describes where on the Form 941 the employer may claim the payroll tax credit and supporting documentation that should be maintained. This documentation includes:

  • Information on the receipt, including dates and amounts, of each assistance eligible individual's 35% share of the premium;
  • In the case of an insured plan, a copy of invoices or other supporting statements from the insurance carrier and proof of timely payment of the full premium required under COBRA to the insurance carrier;
  • In the case of a self-insured plan, proof of the premium amount and proof of the coverage provided to the assistance eligible individuals;
  • Attestation of involuntary termination, including the date of the involuntary termination for each covered employee receiving the subsidy;
  • Proof of each assistance eligible individual's eligibility for COBRA coverage at any time during the period from September 1, 2008, to December 31, 2009, and such individual's election of COBRA coverage;
  • A record of the social security numbers of all covered employees, the amount of the subsidy reimbursed with respect to each covered employee, and whether the subsidy was for one individual or two or more individuals; and
  • Other documents necessary to verify the correct amount of reimbursement.

If you have questions about the Act, please contact Paul Jacobson at (414) 277-5631 / [email protected], Robert Rothacker at (414) 277-5643 / [email protected], David Olson at (414) 277-5671 / [email protected], Amy Ciepluch at (414) 277-5585 / [email protected], Sarah Linsley at (312) 715-5075 / [email protected], Kerri Hutchison at (414) 277-5287 / [email protected] or your Quarles & Brady attorney.

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