Employee Benefits-IRS Posts A Reminder That COBRA Subsidy Recipients Who Later Become Eligible For Other Group Health Coverage Should Notify Their Plan To Avoid A Penalty

The IRS has posted on its website a reminder that any individual who has qualified for and is receiving the 65 percent subsidy for COBRA health insurance, due to involuntary termination from a prior job from September 1, 2008 through December 31, 2009, should notify the plan providing the COBRA coverage, in writing, if he or she becomes eligible for other group health plan coverage. Such other coverage includes group health plan coverage from a new job or Medicare.

The model general notice that the United States Department of Labor issued for advising individuals of their right to subsidized COBRA continuation payments includes a form that individuals may use to notify the plan that they have become eligible for other group health plan coverage. If an individual continues to receive the subsidy after becoming eligible for such other coverage, the individual may be subject to the new Internal Revenue Code § 6720C penalty of 110 percent of the subsidy provided after he or she became so eligible.