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IRS clarifies COBRA subsidy’s ‘involuntary termination’ language—sort of

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in Employment Law,Firing,Human Resources

When the mammoth American Recovery and Reinvestment Act of 2009 (ARRA) was enacted in February, lots of the details were still fuzzy. Take, for example, the term “involuntary termination” in the section of the economic stimulus law that grants a 65% subsidy for former employees who buy continuation health coverage under COBRA.

Congress and the White House presumably meant the subsidy to go to employees who had involuntarily lost their jobs because of layoffs or plant closings. But the law didn’t say so.

Now the IRS, tasked with clarifying the subsidy language, has defined “involuntary termination.” It turns out, it may not mean what you think it means.

Most people would understand “involuntary” as meaning the employer—not the employee—made the decision to terminate employment.

But according to Ogletree Deakins employment law attorneys Tim Stanton and Brian Black, IRS Notice 2009-27 implies that some employees who initiate their own terminations could still qualify for the 65% COBRA subsidy. Read their analysis of this confusing issue below.

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