Remodelers are trying to sort out a provision of the $787 billion economic stimulus legislation involving COBRA, the federal law that lets people continue to receive group health insurance for up to 18 months after they lose or leave a job.
Until now, individuals had to pay the full premium amount. Under the stimulus law, employers of 20 or more people must pay 65% of COBRA costs, for up to nine months, for anyone involuntarily terminated between Sept. 1, 2008, and Dec. 31, 2009. They must also notify these individuals of their eligibility for the subsidy.
The government will reimburse employers who properly claim the credits on their quarterly federal tax returns. Still, “it’s not the best time to put an additional cash flow burden on us,” summarizes Steven Schiltz, CEO of Minnesota Exteriors, in Osseo, which expects about half a dozen former staffers to be affected. “We have to front the money, and you’re dealing with the government, so who knows how long it’s going to take [to get reimbursed].” His payroll service provider has been helpful in interpreting and complying with the requirement. “But they’re still trying to figure out the details too,” Schiltz says.
Even tax experts are playing catch-up. “This part of the stimulus bill didn’t get publicized,” says Todd Taggart, who leads the construction practice of audit, tax, and advisory organization Grant Thornton. He advises remodelers to scrupulously document efforts to notify former staff, given the mobility of the construction workforce, and to follow Internal Revenue Service guidelines to the letter to get reimbursed.
In a case of good intentions having the opposite consequences, the COBRA requirement is even causing some remodelers to consider not offering health insurance to staff hired as long as the statute is in effect. It’s just not worth the risk of potentially having to pay thousands of dollars in COBRA premiums, should those staff not last for whatever reason, says one Maryland remodeler.