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Latest IRS COBRA guidance has some surprises for employers

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in Employee Benefits Program,Firing,Human Resources

by Tim Stanton and Brian D. Black, Esqs.

Employers now have an answer to their single biggest and most vexing question about the elaborate new federal subsidy arrangement under the Consolidated Omnibus Budget Reconciliation Act (COBRA), but it may not be the answer they were hoping for or expecting.

Under the law, most involuntarily terminated employees have to pay just 35% of the cost of COBRA continuation health care coverage. Employers cover the rest and then the government reimburses them.

Under new IRS Notice 2009-27, an “involuntary termination” would include certain employee-initiated “good reason” terminations, layoffs with recall rights and even certain cases where employees took severance buyouts.

What does ‘involuntary’ mean?

“An involuntary termination,” says Notice 2009-27, which interprets the COBRA provisions of the American Recovery and Reinvestment Act of 2009 (ARRA), “means a severance from emplo...(register to read more)

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