Tag Archives: cobra

2009 Economic Stimulus Plans Effect on Taxes Now and Beyond

As most of you know, President Obama signed the American Recovery and Reinvestement Act into law on Tuesday. Supposedly, millions of Americans will benefit from the plan in more ways than one. Here are a few highlights from the plan and how they will affect your taxes now and in the future.

Making Work Pay Credit

The making work pay credit will be heading to a paycheck near you in the coming months. The employed will get up to $400 per individual and $800 per married couple. Sounds like quite a good amount. However, you will not see all of this money at once as it will be used to reduce your weekly federal taxes on your paycheck. Every little bit helps in these economic times.

What about retirees, veterans, or people on disability? These individuals on Social Security will get a one-time $250 check in 2009. That should help give a small boost to those individuals on a strict fixed income.

What if you are unemployed? The bill has added several things to help those who are unemployed. It has exempted the first $2,400 in unemployement benefits from federal taxation. The bill has also increased the payout by $25 a week, extended the time period for benefits, and it gave a 65% break on COBRA premiums. I just hope this helps incourage individuals to seek work and not just keep them on unemployement longer.

Help For Individuals With Low Incomes

The bill also provides a larger Earned Income Credit (which is refundable) for families with 3 or more children. For those of you that fit into this category it will not affect you until you file your 2009 taxes. However, you may be able to get EIC advance payments by talking to your HR representative at work.

There was also a part of the bill that lowered the threshold for the child tax credit. This will help lower income families due to the lowering of the threshold from $8,500 to $3,000 for the current tax year.

Making Home Ownership More Affordable

The bill included the long awaited (and widely talked about) 1st time homebuyer credit. The original $7,500 credit needed to be paid back over several years. The new credit is refundable (meaning you can get the money even if you have no tax due) and does not need to be paid back. The nice thing about this credit is that you can take it on your 2008 tax return. If you have already filed your return, you may want to consider an amendment.

What are your thoughts on some of these measures? Will they work or will they come back and bite us later down the road?

Health Insurance: Part 3 – COBRA Coverage

This is Part 3 of a series on health insurance. Part 1 discussed deductibles. That post discusses  how they affect your plan and costs. Part 2 discussed stop-loss provisions and co-insurance.

The Consolidated Omnibus Budget Reconciliation Act of 1985 or COBRA, is a set of provisions that require some employers (those with 20 or more employees) to continue health insurance coverage for employees after termination of employment.

Termination of Employment

Under COBRA, the employer must offer continued health insurance coverage for 18 months from the date of termination or demotion to part-time.¬† If the employee was fired due to “gross misconduct”, COBRA benefits do not have to be offered. COBRA coverage can be terminated before the 18 month period if any of the following occur:

  • the employer terminates the health plan for all employees
  • the employee neglects to pay the required premium
  • the employee becomes covered under a new medical plan (however, if pre-existing conditions are excluded on the new plan, the employee must be allowed to continue COBRA)

The employer is allowed to require the employee to pay for some of the costs of COBRA coverage. However, they are not allowed to charge more than 102% of the cost of the insurance.

Disability

If termination is due to disability, coverage must be allowed to be continued for up to 29 months. All of the requirements set above are still applicable.

Other Options

There are several other events where an employer must offer 36 months of continued coverage to an employee or their beneficiaries. These events include:

  • death of employee
  • divorce or legal separation of the employee
  • employee’s entitlement to Medicare
  • bankruptcy

Recommendations

COBRA can be a very beneficial for many individuals, especially in these tough times. If you lose your job, check with your previous company about COBRA coverage. The coverage may be more expensive than you are accustomed to, but may be considerably less than if you were to purchase individual coverage. It also allows you to avoid the possibility of having pre-existing conditions placed on your new policy. For example, if you were recently treated for cancer, your new policy may not cover you for those related expenses. COBRA coverage may help ensure that those expenses are covered for a period of time.

Has anyone had a specific COBRA experience they would like to share?