COBRA Subsidy Provision Under Economic Stimulus Bill

February, 2009

Congressional leaders from the House and Senate agreed February 11 to terms of the tax and spending provisions in the economic stimulus bill (H.R. 1) that would affect withholding.

No written copies of the agreement were available as of early February 12, and there was no mention of reconciling the different House and Senate provisions related to subsidizing health premium payments under COBRA to those involuntarily terminated from employment. The Senate version of the bill would provide a subsidy equal to 50 percent of the cost of 12 months' worth of COBRA health insurance premiums for workers involuntarily separated from employers after August 31, 2008, and before January 1, 2010. The House version of the bill calls for a 65 percent COBRA subsidy for up to nine months.

To make the subsidy work, employers would be required to use employment tax money withheld from existing employees to make the COBRA payments directly to insurers instead of remitting those amounts to the federal government. Employers would be eligible to receive a federal cash payment if reducing withholding-tax remittances does not cover the subsidy.

Cascade will post further updates to the COBRA subsidy provision as they become available.


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