How do I Deduct From a Paycheck for Cobra Coverage?
Cobra health insurance continuation is available to employees who no longer qualify for insurance benefits at the company where they work. Deductions on Cobra premiums are an option when the employee's hours have been reduced or the employee was laid off or fired for any reason, with the exception of gross misconduct, according to the Department of Labor. For continuing employees with lowered hours, the company should set up a paycheck deduction for coverage.
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Instructions
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Deducting Cobra Premiums
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1
Confirm the employee's eligibility status. An employee is eligible for Cobra if he was covered by the company health plan but is now ineligible because of reduced hours. If an employee is a new hire and is eligible for the company plan, he is not eligible for Cobra.
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2
Obtain a copy of the Cobra invoice from the employee for your records. You will need it to determine the deduction amount and for the address where you will send payments on the employee's behalf.
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3
Divide the monthly premium by the number of pay periods in the month. For a weekly pay cycle, divide by four, or divide by two for a biweekly pay cycle.
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4
Draw up an agreement specifying the amount to be deducted from each paycheck and the reason for the deduction. Attach a copy of the billing statement, which the employee must sign.
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5
Mail payments to the remittance address on the bill. Each month, the employee should supply the company with a copy of the billing statement.
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Tips & Warnings
It is not legal for an employer to withhold any amount above the payroll tax deductions without the employee's express written consent. No deductions should be made without a signed consent form.
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