The Department of Labor has released model notices that have been updated for the Temporary Extension Act of 2010. These notices comply with the requirements that certain current and former participants and beneficiaries should be notified about the COBRA premium reduction.

The model notices available on the Web site include:

• Model Updated General Notice
• Model Notice of New Election Period
• Model Supplemental Information Notice
• Model Notice of Extended Election Period
• Model Updated Alternative Notice

Click here to view the model notices.

The Department of Labor has posted an updated COBRA Premium Reduction fact sheet to include the Temporary Extension Act of 2010. The TEA extended the COBRA premium reduction eligibility period for one month until March 31, 2010, and expanded eligibility to individuals who experience a qualifying event that is a reduction of hours occurring at any time from Sept. 1, 2008 through March 31, 2010 which is followed by an involuntary termination of employment on or after March 2, 2010 through March 31, 2010. This expansion also includes a second election opportunity for these individuals who had a reduction of hours qualifying event followed by an involuntary termination, if they did not elect COBRA continuation coverage when it was first offered OR elected but subsequently discontinued COBRA.

Assistance Eligible Individuals (AEIs) now include anyone who experienced a Qualifying Event (QE) of Reduction of Hours on or after Sept. 1, 2008 who subsequently experienced an Involuntary Termination on or after March 2, 2010 (enactment date of HR 4691 extension) through March 31, 2010. If the individual is not currently on COBRA, whether they originally elected and subsequently had their COBRA terminated, or if they never elected, they will now have a second chance opportunity to elect COBRA. Their 18 months of COBRA will be calculated from the original QE date for the Reduction of Hours. Thus similar to the original ARRA enactment, there will be some who will have a gap in coverage.

Click here to read the HR 4691 extension document.

Late Tuesday, Senator Jim Bunning (R-Ky.) ceased his blockage of a vote on an additional COBRA extension after he came to an agreement with Democratic Senate Leader Harry Reid. The deal would cut costs on other programs to offset the unemployment bill’s $10 billion cost. 

The Senate then passed a 30-day extension that maintains unemployment benefits for hundreds of thousands of people whose benefits were set to expire this week.

• The eligibility period was changed from Dec. 31, 2009 to Feb. 28, 2010.
  
• The duration period of the premium subsidy was extended from 9 to 15 months.

Notice that the eligibility for the subsidy is based on the qualifying event’s timing (instead of COBRA eligibility).

Resources and Forms

• On January 22, DOL conducted a compliance assistance webcast on the COBRA premium subsidy as extended by the Department of Defense Appropriations Act of 2010 (2010 DOD Act). Click here to view an archived copy of the webcast. Be sure to listen to the entire webcast; it provides much needed clarification.

• COBRA Questions and Answers: Reporting and Documentation, Q/A RD-6 (Rev. Jan. 20, 2010); IRS News Release IR-2010-9 (Jan. 20, 2010). In Q&A RD-6, the IRS has addressed a question about the timing for an employer's tax credit relating to a reduced COBRA premium payment received by an employer in January 2010 for December 2009 coverage. Click here to view Q&A RD-6. Click here to read the News Release.

• DOL Posts Revised Fact Sheet, Revised Model Notices and New FAQs on the COBRA Premium Subsidy Extension. This new guidance deals with transition period and notice requirements of the subsidy extension included in the 2010 DOD Act. Click here to view the DOL model notices. Click here to read the FAQs. Click here to view the revised DOL fact sheet. Click here to view Poster and Flyers.

• Information Letter 2009-0243 (Oct. 27, 2009). This letter answers an inquiry about the deductibility of COBRA premiums. The answer explains that an individual may deduct medical expenses paid for qualified medical care, to the extent that these expenses exceed 7.5% of the individual's adjusted gross income, and that insurance premiums paid for medical care are specifically included as a medical expense. If the individual qualifies for and elects ARRA, the medical expense amount is limited to the COBRA premium actually paid by the individual. Click here to read the letter.

• Application for Expedited Review of Denial of COBRA Premium Reduction (Feb. 17, 2010). This application is for use by individuals who have been denied the COBRA premium subsidy after they have requested to be treated as assistance eligible individuals entitled to the COBRA premium subsidy. This application requests the DOL to review their denial. (The 2010 DOD's changes are taken into account.) Click here to see a copy of the application.

FOR FURTHER INFORMATION

The best resources for the COBRA premium subsidy can be found at the DOL’s website, www.dol.gov/COBRA. You can also call a DOL Benefits Advisor toll-free at 1-866-444-3272 for answers to your questions. (They can only answer questions, but not take your application over the phone.)

Fleet-Average Rule: The fleet-average rule governs employers operating a fleet of 20 or more qualifying vehicles (depending on the average lease value). The IRS has set up the maximum vehicle values to be used in calendar year 2010. The maximum values for which the fleet-average rule may be used are $20,300 for passenger automobiles and $21,000 for trucks or vans (up from $19,900 for both in 2009).

Cents-Per-Mile: The cents-per-mile rule determines the value of an employee's personal use by multiplying the standard mileage rate (50 cents per mile for 2010) by the number of miles driven for personal purposes. The maximum values for the cents-per-mile rule are $15,300 for passenger automobiles and $16,000 for trucks or vans (up from $15,000 and $15,200, respectively, in 2009).

Click here to view Rev. Proc 2010-10, 2010-3 I.R.B. 300 (Jan 14, 2010)

The IRS has released Forms 5498-SA and 1099-SA for the 2010 tax year along with their instructions. Form 5498 must be filed by the trustees and custodians of HSAs, Archer MSAs, and Medicare Advantage MSAs to report contributions to (and the fair market value of) these accounts. They also must file Form 1099-SA to report distributions. These forms are not to be used until 2011 when the 2010 tax year is due.

Click here to view a copy of 5498-SA (2010) (HSA, Archer MSA, or Medicare Advantage MSA Information).

Click here to view a copy of 1099-SA (Distributions from an HSA, Archer MSA, or Medicare Advantage MSA) (2010).

Click here to view the instructions for both forms.

The IRS has issued question-and-answer guidance on the recent changes to the Code by the Heroes Earnings Assistance and Relief Tax Act of 2008 (HEART Act). This Act’s changes enhance 401(k) and other benefits for military personnel in qualified military service.

The guidance consists of 20 questions and answers. Some of the areas the Q&As cover are:

• Survivor and Disability Retirement Benefits With Respect to Military Service.
• Differential Wage Payments
• In-Service Distributions

Those with plans covering employees on active military duty should review these Q&As very carefully because they make clear some areas that have been gray before.  

Click here for a copy of Notice 2019-15: Miscellaneous HEART Act Changes

The Department of Labor's Employee Benefits Security Administration has posted an updated Application for Expedited Review of Denial of COBRA Premium Reduction on their Web site for the 2010 DoDAA. The application is for individuals who want to request that the DOL review a denial of a COBRA premium subsidy. The DOL is required to make a determination within 15 business days after receipt of application for review. The site includes a quick check on eligibility for the COBRA premium reduction before directing individuals to the application that can be printed or completed online.

Click here to access the application.