Cobra Subsidy On Voluntary Plans

[ABC]

“Does The American Recovery and Reinvestment Act subsidy apply to “voluntary”
benefit plans where the employee pays 100% of
the cost of the plan?

Under certain voluntary plans (such as dental and vision,
for example) employees pay 100% of the premium.
However, to the extent that such programs are subject
to COBRA continuation, they would be eligible for the
subsidy. Employers have complained that they should
not be paying a subsidy for a program that was voluntary,
but ARRA does not exempt these plans. Further, since
employers will obtain a refund of the subsidy through
their payroll taxes, these programs are being funded by
the federal government, not the employer.”


This is really amazing that voluntary benefits are being covered. If you have cobra eligible groups where your running voluntary products through Cobra the employer needs to know about this.

This information came from UHC

 

[Y.L. Prinzel]

Only when COBRA is used after a layoff though, right?

 

[ABC]

Only when COBRA is used after a layoff though, right?

Any reason for termination other than gross mis conduct with in the time frame.
Now if you have access to another group plan then that will excluded you from the subsidy.

If you have voluntary benefits and they are administered through Cobra well now the Gov is going to subsidize them if your eligible. The cost of this subsidy is going to be astronomical.


With this rich subsidy everyone is going to elect Cobra. That means to move group business is going to be a nightmare because of the cobra people on the plans.

 

[moonlightandmargaritas]

With this rich subsidy everyone is going to elect Cobra.

Not necessarily, I've had five that after we did the math stayed with individual, two that opted for COBRA.

In addition, the subsidy is for nine months. What happens if something effects your insurability in that timeframe? Then you run out the COBRA (at the total cost), and are stuck with a guaranteed conversion plan/state risk pool after that. Talk about expensive...

 

[Dave020]

Any reason for termination other than gross mis conduct with in the time frame.

Involuntary termination gets the subsidy, not voluntary termination.

 

[ABC]

Involuntary termination gets the subsidy, not voluntary termination.

I agree but

What does “involuntarily terminated” mean?​

Persons who are involuntarily terminated from
employment are eligible for the subsidy. This is not
a term that is defi ned either in ARRA or in COBRA
generally. The COBRA ban on persons who were
terminated for “gross negligence” would continue to
operate and those persons would not have COBRA
at all. However, anyone who is laid off, fi red or
otherwise dismissed from a job involuntarily during the
applicable periods would likely be eligible. Moreover,
even if an employee quits his or her job in anticipation
of an adverse employer action (lower pay, relocation
or reduced hours, for example) and loses coverage,
the subsidy will apply. Employees who are told not
to come back to work until further notice and who go
on COBRA during that time period are considered to
be involuntarily termination under ARRA. This would
also apply to furlough situations where the employees
are not working and become eligible for COBRA.
However this does not apply to situations where the
employer reduces the number of hours the person
works but where the person continues on the job. A
retirement, if the facts and circumstances indicate
that, absent retirement, the employer would have
terminated the employee’s services, and the employee
had knowledge that he or she would be terminated
is considered involuntary termination. A resignation
as the result of a material change in the geographic
location of employment for the employee is also an​

involuntary termination.

With this interpretation anyone could say that was the reason they quit and become eligible for the subsidy. With the mass reduction in pay and hours who is going to question it?

 

[somarco]

Involuntary termination gets the subsidy, not voluntary termination.

I ran into that today.

Seems this guy worked for a company as a W2. They made him an offer he could not refuse . . . . 1099 or no job.

He took the 1099.

Now he is crabbing because he can't get the subsidy.

Can't believe his employer is the only one who thought of that.

 

[Y.L. Prinzel]

I agree but

What does “involuntarily terminated” mean?​

Persons who are involuntarily terminated from
employment are eligible for the subsidy. This is not
a term that is defi ned either in ARRA or in COBRA
generally. The COBRA ban on persons who were
terminated for “gross negligence” would continue to
operate and those persons would not have COBRA
at all. However, anyone who is laid off, fi red or
otherwise dismissed from a job involuntarily during the
applicable periods would likely be eligible. Moreover,
even if an employee quits his or her job in anticipation
of an adverse employer action (lower pay, relocation
or reduced hours, for example) and loses coverage,
the subsidy will apply. Employees who are told not
to come back to work until further notice and who go
on COBRA during that time period are considered to
be involuntarily termination under ARRA. This would
also apply to furlough situations where the employees
are not working and become eligible for COBRA.
However this does not apply to situations where the
employer reduces the number of hours the person
works but where the person continues on the job. A
retirement, if the facts and circumstances indicate
that, absent retirement, the employer would have
terminated the employee’s services, and the employee
had knowledge that he or she would be terminated
is considered involuntary termination. A resignation
as the result of a material change in the geographic
location of employment for the employee is also an​

involuntary termination.

With this interpretation anyone could say that was the reason they quit and become eligible for the subsidy. With the mass reduction in pay and hours who is going to question it?

Holy cow, at first I thought you didn't understand that I was questioning the subsidy's application and not COBRA's use--but after this I see you did understand my questions and in fact, had more information than I had. You do still have to have SOME indication that you are going to lose your job though in order for the subsidy to be applicable.

 

[Dave020]

It's quite complicated in terms of determining when a voluntary termination can be construed as technically involuntary. It's here pages 5-7 with lots of explanation.

http://www.conexis.com/pdfs/notice2009-27.pdf

One thing that ARRA is absolutely clear on, per Conexis,:

Death is NOT an involuntary termination of employment.

 

[Y.L. Prinzel]

One thing that ARRA is absolutely clear on, per Conexis,:

Death is NOT an involuntary termination of employment.

I think a good attorney could argue that one