IMPORTANT

The Internal Revenue Service has provided an update regarding COBRA payments,
The Recovery Act provides a 65% premium subsidy for 9 months to employees involuntarily terminated between Sept. 1, 2008 through Dec. 31, 2009. These provisions became effective on Feb. 17, 2009.

If an eligible employee pays 35% of the premium, the group health plan must treat that individual as having paid the full premium required for COBRA continuation coverage. The Recovery Act also provides a mechanism for reimbursing the employer—for the difference between the full premium and the amount paid by the employee. While employers must treat the 35% payment by eligible former employees as full payment, they are entitled to a credit for the other 65% of the COBRA cost on their quarterly employment tax return Form 941.

An employer that provides the subsidy may take the COBRA coverage credit on its employment tax return only after it has received the 35% premium payment from the individual.

Please provide Granite Payroll Associates Inc, with the employees and COBRA amounts so we can adjust your quarterly tax form appropriately.

Thank You
Granite Payroll Associates