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Compliance Assistance Resources

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- Health Benefits Advisor for Employers

Consolidated Omnibus Budget Reconciliation Act (COBRA)

The Trade Act of 2002

Certain individuals may be eligible for a Federal income tax credit that can alleviate the financial burden of COBRA payments. The Trade Adjustment Assistance Reform Act of 2002 (Trade Act of 2002) created the Health Coverage Tax Credit (HCTC), an advanceable, refundable tax credit for up to 65 percent of the premiums paid for specified types of health insurance coverage (including payments for COBRA coverage). The HCTC is available to certain workers who lose their jobs due to the effects of international trade and who qualify for trade adjustment assistance (TAA) or alternate trade adjustment assistance (ATAA), as well as to certain individuals who are receiving pension payments from the Pension Benefit Guaranty Corporation (PBGC).

Individuals who are eligible for the HCTC may choose to have the amount of the credit paid on a monthly basis to their health coverage provider as it becomes due, or may claim the tax credit on their income tax returns at the end of the year.

In addition to creating the HCTC, the Trade Act of 2002 amended COBRA to provide the TAA and ATAA workers described above (but not PBGC pension recipients) with a second opportunity to elect COBRA coverage. The intent of this second 60-day election period is to enable those individuals who became TAA or ATAA-eligible after their initial COBRA election period has expired to take advantage of the HCTC.

Note - There is no specific disclosure requirement in COBRA regarding the rights and duties of workers that may arise as part of the Trade Act. Nonetheless, the Department has included an optional Trade Act paragraph in the model election notice to assist plan administrators who wish to notify potentially eligible individuals of their rights under the Trade Act as they relate to COBRA coverage.

Information on the possible availability of the special COBRA election period should be included in your plan's summary plan description (SPD) as part of your plan's discussion of COBRA coverage provisions.

For more information about the Health Coverage Tax Credit and second COBRA election period, call the HCTC Customer Contact Center at 1-866-628-HCTC (4282) (TDD/TYY: 1-866-626-HCTC (4282)) or visit HCTC.