Notice 2009-27 provides guidance under Section 3001 of the American Recovery and Reinvestment Act of 2009 relating to the premium reduction for individuals who were involuntarily terminated and are electing COBRA continuation coverage under the group health plan of their former employer.
ance. This notice applies to Build Amer- tact Ms. Young or Mr. Jones at (202) amount of the premium. The employer ica Bonds, including Recovery Zone Eco- 622–3980. (or, in certain circumstances, the multiem- nomic Development Bonds, issued after ployer health plan or the insurer) is reim- February 17, 2009. bursed for the other 65 percent of the pre- Premium Assistance for mium that is not paid by the assistance eli- SECTION 8. PAPERWORK gible individual through a credit against its COBRA Benefits REDUCTION ACT payroll taxes. The premium reduction applies as of the Notice 2009–27 The information collection contained in first period of coverage beginning on or this notice has been approved by the Of- This notice provides guidance relating after February 17, 2009 (the date of en- fice of Management and Budget (OMB) in to section 3001 of the American Recovery actment of ARRA). An assistance eligi- accordance with the Paperwork Reduction and Reinvestment Act of 2009 (ARRA), ble individual is eligible for the premium Act (44 U.S.C. chapter 35) under control Public Law 111–5, enacted February 17, reduction for up to nine months from the number 1545–2143. Under the Paperwork 2009, relating to premium assistance for first month the premium reduction provi- Reduction Act, an agency may not conduct COBRA continuation coverage. sions of section 3001 of ARRA apply to or sponsor and a person is not required to the individual. The premium reduction pe- respond to a collection of information un- BACKGROUND riod ends if the individual becomes eligible less it displays a valid OMB control num- for coverage under any other group health ber. Section 3001 of ARRA provides for plan1 or for Medicare benefits. The collections of information in this a 65 percent reduction in the premium The premium reduction does not ex- notice are in Section 5. The information otherwise payable by certain involuntarily tend beyond the period of COBRA contin- is required in order to inform the Trea- terminated individuals and their families uation coverage. An individual receiving sury Department and the IRS of expected who elect COBRA continuation health the premium reduction who becomes eli- future direct payments on Build America coverage under the provisions of the Inter- gible for coverage under any other group Bonds. This information will be used to nal Revenue Code (Code), the Employee health plan or Medicare is required to no- determine the expected amount of future Retirement Income Security Act of 1974 tify the group health plan of eligibility for direct payments on Build America Bonds. (ERISA), and the Public Health Service that other coverage. If the individual fails The collections of information are manda- Act (PHS Act). (COBRA continuation to notify the group health plan, the individ- tory. The likely respondents are state or lo- coverage under the Code, ERISA, and ual is subject to a tax penalty of 110 per- cal governmental issuers of Build America the PHS Act is also referred to in this cent of the premium reduction improperly Bonds. notice as “Federal COBRA.”) The pre- received after eligibility for the other cov- We estimate the total number of respon- mium reduction also applies to temporary erage. dents to be 1,000 and the total annual re- continuation coverage elected under the Under ARRA, an employer may allow sponses to be 5,000. We estimate it will Federal Employees Health Benefits Pro- an assistance eligible individual to elect take 3 hours to comply. Estimates of the gram (FEHBP) and to continuation health coverage different from the coverage un- annualized cost to respondents for the hour coverage under State programs that pro- der the plan in which such individual was burdens shown are not available at this vide for coverage comparable to COBRA enrolled prior to the involuntary termina- time. continuation coverage. For purposes of tion, and the premium reduction will ap- Books or records relating to a collection ARRA, continuation health coverage un- ply with respect to such different cover- of information must be retained as long der all of these provisions is referred to as age. (This does not change the basic re- as their contents may become material in “COBRA continuation coverage.” quirement under Federal COBRA that a the administration of any internal revenue Under the new provision, an assistance group health plan must allow a qualified law. Generally, tax returns and return in- eligible individual is generally an individ- beneficiary to elect to continue the cover- formation are confidential, as required by ual (1) who is a qualified beneficiary as the age in which the individual is enrolled as 26 U.S.C. 6103. result of an involuntary termination dur- of the qualifying event.) If offered, the as- ing the period from September 1, 2008, sistance eligible individual has 90 days af- SECTION 9. DRAFTING through December 31, 2009, (2) who is el- ter receiving notice of the option to elect INFORMATION igible for COBRA continuation coverage the other coverage. The premium for cov- at any time during that period, and (3) who erage offered under this option cannot ex- The principal authors of this notice are elects the coverage. Group health plans ceed the premium for the coverage the in- Carla Young and Timothy Jones of the Of- must generally treat assistance eligible in- dividual had prior to the involuntary ter- fice of Associate Chief Counsel (Finan- dividuals who pay 35 percent of the pre- mination. In addition, the coverage of- cial Institutions and Products). For fur- mium otherwise payable for COBRA con- fered under this option must be coverage ther information regarding this notice, con- tinuation coverage as having paid the full offered to active employees and cannot be 1 Eligibility for coverage under any other group health plan does not terminate eligibility for the premium reduction if the other group he
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