When you consider the costs of terminating employees, you must consider the COBRA subsidy provisions that were included in the stimulus bill enacted last month.
Under that bill, employees who lose their jobs and who lose their health coverage as a result are entitled to a subsidy of 65% of their COBRA premiums for nine months. An employee who was terminated from employment and became eligible for COBRA coverage between September 1, 2008 and September 3, 2009 is eligible for this subsidy.
This additional cost is really only an interest free loan to the government since any business paying the subsidy is entitled to a credit against taxes paid to the federal government. However, there is a real cash flow impact of this “loan”. Before terminating employees who may be eligible for COBRA coverage, consult your accounting advisor to determine the impact on your business.
When you consider the costs of terminating employees, you must consider the COBRA subsidy provisions that were included in the stimulus bill enacted last month.
Under that bill, employees who lose their jobs and who lose their health coverage as a result are entitled to a subsidy of 65% of their COBRA premiums for nine months. An employee who was terminated from employment and became eligible for COBRA coverage between September 1, 2008 and September 3, 2009 is eligible for this subsidy.
This additional cost is really only an interest free loan to the government since any business paying the subsidy is entitled to a credit against taxes paid to the federal government. However, there is a real cash flow impact of this “loan”. Before terminating employees who may be eligible for COBRA coverage, consult your accounting advisor to determine the impact on your business.