When President Obama signed the American Recovery and Reinvestment Act (ARRA) into law in February, a collective sigh of relief went up from the ranks of unemployed individuals who depend on COBRA for continued medical coverage — or, at least, from those lucky enough to benefit from the law’s 65 percent subsidy of the COBRA premium (which certainly wasn’t everyone — for example, people who lost their jobs before September 1, 2008, were out of luck, as Business Finance readers pointed out in a flurry of responses to Laurie Brannen’s blog on the topic back in February).

As any HR pro or benefits attorney will tell you, the Consolidated Omnibus Budget Reconciliation Act is just about the most mind-numbingly complex of all federal laws governing the workplace. The tax ramifications of ARRA’s COBRA tweaks are multitude, and the IRS has been playing catch-up ever since Mr. Obama inked the bill.

The agency’s latest guidance, issued on June 4, comes in the form of additions to its Web page “COBRA: Answers for Employers,” under the sections “Administration and Eligibility,” “Reporting and Documentation,” and “Form Preparation.”

The additions cover some important issues, including the question of whether an employer is required to report the subsidy provided to an assistance-eligible individual on Form W-2. (The IRS’s answer: “No information reporting of the COBRA premium subsidy is required to be provided to an assistance-eligible individual or to the IRS by an employer, multi-employer plan, or insurer. However, any person claiming a payroll tax credit for the COB premium on Form 941, Employer’s Quarterly Tax Return — or other applicable form — must keep records of the individual payments and other documentation to support the credit as discussed in RD-1” [a.k.a. Reporting and Documentation question 1]).

Other key topics covered include determination of an involuntary termination; military leave; seasonal workers; and payment of COBRA premiums through a health reimbursement account (HRA). ###