Changes Affecting COBRA

The IRS provides a newsletter service. One particular notice focused on Information to Help Employers Claim COBRA Medical Coverage Credit on Payroll Tax Form. Employers are able to claim the COBRA medical premiums paid on behalf of former employees. These COBRA payments are claimed on Form 941- the Employer’s Quarterly Federal Tax Return.

The American Recovery and Reinvestment Act of 2009, more commonly known as the stimulus bill, has provisions that impact COBRA. The important change requires that former employees pay no more than 35% of COBRA coverage cost. Employers may claim the remaining 65% as a tax credit.