COBRA Subsidy

In a past life I administered COBRA plans for dozens of employers. I am keenly aware how much of a burden COBRA is to both large and small employers. Now I can see how these new COBRA subsidy rules, that will greatly assist COBRA participants financially, can be quite a burden to the small employers' administrative staff.
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Also, "in order for employees to qualify, they have to have been let go for lack of work. They don't qualify if they were let go for disciplinary or performance reasons," Wind says. The subsidy applies to employees laid off between Sept. 1, 2008, and Dec. 31, 2009, and it ends when the former employee is offered employer-sponsored health-care coverage by a new employer; becomes eligible for Medicare; or when his COBRA coverage expires. The subsidy is not available to individual former employees whose income is more than $125,000 a year or who have family income of more than $250,000 annually.
Employer's Burden
While the business owner does get reimbursed by claiming a credit when she files her quarterly payroll tax returns, "the onus is on the small business owner to float the boat" until the tax credit comes through, Wind notes. Also, if your quarterly payroll tax deposits are fairly low and several of your laid-off workers elect COBRA, you might wind up having to request reimbursement of your 65% from the U.S. Treasury. This could be difficult for small businesses that have laid off employees because they are struggling with cash flow issues during this recession.
The other difficulty, besides the increased paperwork and employee notification requirements, is that the employer must collect the former employee's 35% before he can claim the payroll tax credit. "The small business owner has to go back and notify anybody who was involuntarily terminated. So if you laid off Mr. or Mrs. Jones last October, they have to be made aware they are eligible for this," Wind says.
 
http://www.businessweek.com/smallbiz/content/may2009/sb20090522_442930.htm?chan=top+news_top+news+index+-+temp_small+business