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No COBRA requirement for ineligible workers

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in Small Business Tax,Small Business Tax Deduction Strategies

Q. My company was forced to lay off some employees. Do we have to subsidize COBRA payments for married ex-workers? L.M.B., Santa Fe, N.M.

A.
Not necessarily. If a worker is involuntarily terminated from the job, the employer generally is required to pay 65% of the premiums needed to continue health insurance under COBRA for up to nine months. The employee has to pay only 35% of the cost. But no subsidy is required if the ex-worker is eligible for coverage under a spouse’s health insurance plan.

Note that this rule differs from the general application of COBRA, where a spouse still can elect to continue coverage and pay for it in full.

Tip: In any event, an employer may recoup its subsidized expenses through a special payroll tax credit or reduced payroll tax deposits.

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