COBRA payments by third parties

hrqueen

We are closing a site and moving the jobs out of the country. Our employees are eligible for TAA benefits due to this move, and that includes the IRS paying 2/3 of COBRA payments under certain circumstances. However, our V.P. of Finance is refusing to participate. We have been told that a TPA on behalf of a company, or an insurance company must accept monthly COBRA payments from a third party (in this case the IRS). Has anyone had an experience with this?
Is this requirement correct?

Hunter1

Don't know where to point you as far as a requirement is concerned, but I think there have been some previous discussions concerning this and you might try a search. Is your VP going to refuse to accept payments from a parent who's paying COBRA payments for a child who has reached limiting age? Court order for a divorced spouse to pay COBRA for a time?

As long as the payment are made on a timely basis, I think you have to provide coverage.

Pearce

From the Final COBRA Regulations issued in 1999. "Paying for COBRA Continuation Coverage
The 1987 proposed regulations identify the qualified beneficiary as the person that can be required to pay the applicable premium. Many plans and employers have asked whether they must accept payment on behalf of a qualified beneficiary from third parties, such as a hospital or a new employer. Nothing in the statute requires the qualified beneficiary to pay the amount required by the plan; the statute merely permits the plan to require that payment be made. In order to make clear that any person may make the required payment on behalf of a qualified beneficiary, the final regulations modify the rule in the 1987 proposed regulations to refer to the payment requirement without identifying the person who makes the payment." I don't believe that there has been anything to change this and I do believe that ANYONE can pay for the coverage.

Don D

Interesting for another reason. I knew a bit about the Trade Adjustment Act (TAA), but did not know until now that the IRS would pay part of COBRA. Do you know under what circumstances they do that or does qualifying for TAA enable that?

hrqueen

Health insurance benefits are available to 3 groups: 1)TAA participants eligible to receive income support; 2) Those eligible participants in the Alternative TAA Program; 3) PBGC recipients.
And health care benefits include: 65% advanceable and refundable tax credit which can be used for health insurance coverage such as COBRA, state COBRA; continuing individual market coverage and certain other state pooling options.
The employee must call the IRS and ask for an application for the Health Insurance Tax Credit. Telephone no. is 1-866-628-4282.

Don D

Just as a point of interest, I have another question. In our state, the Employment Security Commission, which takes the initial claim for unemployment, publishes a notice in the paper stating that certain employees laid off from XYZ are eligible for TAA, but it says little else. Who is it that actually notifies the laid off worker that they are or might be eligible for COBRA reimbursement? What I'm asking is, how might a person know to even make such an inquiry? Is it a tax credit at tax filing time? If so, how in the world can a laid off person pay COBRA all year long and wait for a tax credit?

hrqueen

Our state also publishes a notice, but as employees have been terminated, I have notified the TRA Unit of the Illinois Department of Employment Security and they in turn notify the employee of rights under TAA. I have also met with our employees as a group and notified them that they are eligible for these benefits, including the partial COBRA payments, and the steps they must take in order to receive them.

An employee can either receive the 65% each month by having the IRS add it to his/her 35% and forward it on to the insurance carrier for the monthly COBRA payment, or claim it as a refundable tax credit at year end. But, as you've so correctly pointed out, who can afford paying the 100% up front and waiting until next year for a refund. Our COBRA payments are almost $450 for a single person, and $900 for a family.