When I'm negotiating severance packages for employees, many times
employers will offer to pay a month or more of COBRA payments. COBRA is
the law that says employers have to let employees who lose their jobs
stay on the company's insurance for up to 18 months as long as the
employee pays 100% of the premium. Those premiums can be huge: $1,000 or
more sometimes. Getting the employer to pick up some of the premiums
can be a huge benefit.
Until now, that is.
Find out about the problem I found that occurs if you lose your job after open enrollment by reading my article at AOL Jobs.You have an important choice to make on health insurance. Find out before you enroll in COBRA and before you sign any severance agreement. You're stuck with the choice you make until the next open enrollment in November.
Then, if you think this is a serious problem, tell President Obama by signing the petition I created, which only needs 24 more signatures to go up on the public website (where it will have to gather 100,000 signatures by May 4, so time's a-wasting). Do it today.
While I am sympathetic to employees who lose employer coverage, it is not a good idea under any circumstances for employers to contribute to a former employees health insurance costs unless that contribution is made as part of a formal well-documented employee benefit plan. It should never be done on a casual or arbitrary basis. Doing so would trigger a range of tax compliance issues, possible group insurance contract violation and raise the employer's risk under employment law; all of these problems even aside the Affordable Care Act. That guidance (presumably the guidance that would be given by most employee benefit professionals) has not changed with Obamacare. Of course, an employer can offer severance pay that can be used by the employee to pay for expensive COBRA coverage. That is a safe and non-controversial way to accomplish the same goal. - Tony Novak, CPA, author of COBRAplan.com web site
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