COBRA Expansion Allows Eligible Employers to take Federal Tax Credit
The American Recovery and Reinvestment Act of 2009, includes changes to the health benefit provisions of the Consolidated Omnibus Budget Reconciliation Act of 1985, commonly referred to as COBRA. This is not an EDD program; EDD is sharing this information as a public service.
The COBRA and Cal-COBRA programs allow newly unemployed individuals to retain their health care through their previous employer for a period of time. The individual and the employer share the cost. The ARRA allows an employer to request credit/reimbursement of their share from their federal payroll taxes.
- Federal COBRA is a U.S. law that applies to employers and group health plans that cover 20 or more employees. It allows employees keep their group health insurance when their job ends or hours are cut. The former employee has to pay the premium but can keep their insurance for at least 18 months.
- Cal-COBRA is a California law that is like Federal COBRA. Cal-COBRA applies to employers and group health plans that cover from 2 to 19 employees. It allows employees to keep their insurance for up to a total of 36 months.
Under the new law, eligible former employees, enrolled in their employer’s health plan at the time they lost their jobs, are required to pay only 35 percent of the cost of COBRA/Cal-COBRA coverage. Employers must treat the 35 percent payment by eligible former employees as full payment; the employers are entitled to a credit for the other 65 percent of the COBRA cost on their federal payroll tax return.
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