Ohio DOI vs The Feds?

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18754

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16116

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In an online forum to which both Bob and I contribute, there's an on-going discussion regarding my post from last month reporting on Ohio's implementation of the new COBRA/ARRA regs. In brief, the new Ohio rules state that "(s)mall employers will not be obligated to pay any portion of the premium. The former employee will pay 35% of the premium and the insurance company will claim the credit from the IRS for the 65% of the premium not paid by the former employee."

All well and good, but for one (ahem) minor detail: as Bob points out, "it does not appear to say how that credit will be achieved. Nor does it indicate the IRS will go along with this scheme."

It's that last bit that's the real poser: how can state insurance law trump federal tax law?

While it's very nice that the Ohio Department of Insurance is willing to give the insurer a break, what makes the DOI think it can offer a federal tax break? This morning, I posed that question to the folks at the Ohio DOI, and was delighted to learn that this has the "blessing" of the IRS:

"For this purpose, payroll taxes are defined as Federal income tax withholding ... The credit is claimed on the person’s payroll tax return ... Under ARRA, the “person to whom premiums are payable” is based on the nature of the plan and which COBRA continuation coverage provisions apply ... For any other group health plan subject to ARRA (generally, fully insured coverage subject to State continuation coverage requirements), the insurer providing coverage under the group health plan is allowed the credit." [emphasis added]

So it appears that the state is simply reiterating what the Feds have already specified. Good news, right?

© Copyright 2009 by Henry Stern. All rights reserved. Reprinted with permission. This blog originally appeared on InsureBlog. The InsureBlog is one of the Insurance Law Center’s Top 50 Insurance Blogs for 2009. The Top 50 Insurance Blogs may be found here.

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Ohio DOI vs The Feds?

Henry (Hank) Stern

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