Payroll Tax Credit available for Employers who pay for Recovery Act's COBRA subsidy

The IRS recently issued helpful guidance for employers abiding by the American Recovery and Reinvestment Act of 2009's (the "Recovery Act") attempts to aid employees who are involuntarily terminated. One provision of the Recovery Act provides that a 65% COBRA premium subsidy must be made available to such employees – i.e., once the employee has paid 35% of the premium, the group health plan must treat the employee as having paid the full premium required for COBRA continuation coverage.

The IRS has now explained how employers who have provided (paid for) the 65% balance of the terminated employee's premiums can file for a credit for the subsidy amounts. After receiving the 35% premium payment from the employee, employers should use newly revised Form 941 to claim their subsidy credit. Line 12a, COBRA premium assistance payments, has been added specifically for this purpose.

(Source: Ireland San Filippo, Link: http://www.isfllp.com/knowledgeseries/newscasts_005.asp)