COBRA, State Continuation Premium Reduction and Small Business Health Care Tax Credit
We have discovered that a number of companies may have missed the notification by their insurance or payroll company which informed employers that they may be eligible for reduced health insurance premiums as applies to the American Recovery and Reinvestment Act of 2009 (ARRA).
In that regard, please see if any of the following may apply to your business.
Credit for COBRA Payments
Presently, the following conditions must be met:
· You have over 20 employees (for under 20 employees, see the New Jersey State Continuation Coverage section.
· You have employees (or an employee) that were involuntarily terminated between September 1, 2008 through May 31, 2010.
· The employee(s) have elected continuing coverage under COBRA.
· You have been paying 65% (and getting reimbursed 35% from the employee) towards the employee’s COBRA benefits.
If this applies to your company, you are entitled to be reimbursed for these 65% payments as a deduction on your quarterly 941 payroll reports. Please review your payroll reports from the first quarter in 2009 through now, and make sure that if you have been eligible, the credit has been taken. If not, contact your payroll company (or contact us if your payroll is prepared in-house) to have your reports amended.
For more information, go to: http://www.irs.gov/newsroom/article/0,,id=204505,00.html
IRS Small Business Health Care Tax Credit
· Employer groups with no more than 25 employees.
· Employer must cover at least 50% of health care coverage costs of workers based on the employee-only (single) rate.
· Employees’ average wages (not counting owners or family members) must be below $50,000.
· The maximum credit is worth up to 35% of a company’s premium costs in 2010.
· This credit is claimed on your income tax return.
For more information, go to: http://www.irs.gov/newsroom/article/0,,id=223666,00.html
For New Jersey State Continuation Coverage, please be aware of the following:
Currently, the following conditions apply:
· Employer groups with fewer than 20 employees.
· Individual involuntarily terminated between September 1, 2008 and May 31, 2010.
· Former employees will receive a package of forms from the Carrier. Former employee will complete the forms and send them to the former employer.
· Eligible terminated individual pays only 35%; the insurance carrier pays 65%.
· 35% of premium collected by employer and included with payment to insurance carrier; 65% is deducted from insurance invoice on the next billing cycle.
· Although the premium reduction is available for only a maximum of 15 months, the maximum duration of the New Jersey Continuation coverage is 18 months.
For more information visit: Department of Banking and Insurance website at www.state.nj.us/dobi/division_insurance.arra.html
