The recently enacted Trade
Preferences Extension Act of 2015 has reinstated a little-known
health care trade adjustment assistance tax credit ("TAA")
for certain individuals' COBRA coverage premiums. The credit, which
had expired on January 1, 2014, has been retroactively reinstated through
December 31, 2019.
Background. The Trade Adjustment Assistance Act of 2002
introduced provisions for monetary assistance for U.S. workers
displaced by international trade to assist them in purchasing health
insurance coverage. It also provides a second period during which
affected individuals could elect COBRA coverage. However, only
individuals specifically designated as eligible individuals by the
Department of Labor ("DOL") and state employment agencies are
entitled to the tax credit.
Under the 2002 Act, workers
whose employment was adversely affected by international trade, such
as increased imports or a shift in production to another country, may
become eligible for a TAA. Part of this assistance is a tax credit (currently
72.5%) for the purchase of COBRA coverage. Employees who become
eligible for TAA after a termination of employment or reduction of
hours and who did not elect COBRA coverage during their original
election period receive a second COBRA election period.
TAA Program. The TAA Program is administered by the DOL's
Employment and Training Administration (ETA) through state employment
service agencies. The TAA process starts with the filing of a
petition for eligibility with the ETA. A petition may be filed by a
group of three or more workers, by a company official, by state
employment security agencies, by dislocated worker units, or by a
union or other duly authorized representative of such workers. The
workers on whose behalf a petition is filed must be, or have been,
employed at the firm or subdivision identified in the petition.
Workers' employment must be, or have been, related to the production
of products described in the petition
An individual who has been
determined to be eligible for TAA benefits has a second 60-day COBRA
election period, if he or she rejected COBRA when originally offered.
The period begins on the first day of the month in which he or she
becomes eligible under the TAA program, provided that this second
election is made within six months after the date that health
coverage was originally lost. If COBRA coverage is elected during
this second election period, it becomes effective on the first day of
the second election period and not on the date coverage
Although relatively few
qualified beneficiaries may be eligible for this tax credit, the
Department of Labor may revise its model COBRA notices to include
information on the TAA.