March 31, 2009 Irs issues guidance - new definition of involuntry terminations
WASHINGTON
The Internal Revenue Service has just released guidance on the new federal COBRA premium subsidies available to employees who lose their jobs.
The guidance, released Tuesday, clarifies a number of outstanding questions, such as clarification of when terminated employees are entitled to the subsidy.
Click here for a quick link to the IRS Q&A list.
This guidance defines what constitutes an "involuntary termination of employment" and then provids numerous examples of involuntary termination.
In the guidance, the IRS defines an involuntary termination as:
"the independent exercise of an employer's authority to terminate employment when the employee was willing and able to work."
The determination of whether a termination is involuntary is based on all the facts and circumstances, not on whether a termination is designated as voluntary or a resignation.
For example, the IRS says, retirement could be considered an involuntary termination if the employee knew he or she would be terminated unless the individual retired.
In addition, the resignation of an employee who left due to a "material change" in the geographic location of the employer would be considered to be an involuntary termination.
The IRS guidance extends to many other areas as well, including how the premium subsidy is to be calculated when the employer pays part of the COBRA premium, whether the subsidy is available to those who continue only dental coverage, and the length of the subsidy for employees who are involuntarily terminated several times while the subsidy law is in effect.
The IRS guidance—Notice 2009-27—in PDF format