Stimulus Bill Expands TAA Benefits

President Obama signed the American Recovery and Reinvestment Act of 2009 (H.R. 1) into law on Feb. 17. Otherwise known as the stimulus bill, the act makes numerous changes to the Trade Adjustment Assistance (TAA) program. In addition to expanding TAA eligibility, the act increases the health coverage tax credit (HCTC) and extends COBRA eligibility periods for TAA-eligible individuals and Pension Benefit Guaranty Corporation (PBGC) pension recipients.

The Trade Act of 1974 established the TAA program to help workers whose employment was adversely affected by increased imports. Workers who are TAA-certified can receive income support, relocation allowances, job search allowances, the HCTC and job training. Congress added the HCTC to the program in 2002, which covers 65 percent of qualifying health care premiums for certain TAA-eligible individuals and qualifying PBGC recipients.

Expanded eligibility to service sector and government workers
In general, the TAA program has had relatively little reach, but the stimulus package expands the categories of workers who will be eligible for the program — and by extension, eligible for the increased HCTC and the COBRA subsidy. Before the stimulus bill, TAA generally applied to workers in a firm (or a division within a firm) if:

• A significant number or proportion of workers had become or were expected to become totally or partially separated from service
• The firm manufactures a product
• The separation or threat of separation was due to increased trade with certain foreign countries (i.e., free-trade agreement or unilateral-preference partners) and could involve increased imports or a shift in production

The stimulus package expands TAA eligibility in two key ways. First, it expands TAA from the manufacturing to the service and government sectors. Second, it extends eligibility to those affected by a shift in production to any foreign country.

The provisions take effect 90 days following enactment and will apply to petitions for TAA filed with the U.S. Department of Labor after that date.

Increased HCTC: TAA individuals, PBGC recipients and family members
Congress established the HCTC in 2002 to help those who lost their jobs in the course of international trade afford health care coverage. The credit pays 65 percent of the health insurance premium cost. The stimulus bill increases the health care tax credit to 80 percent of premiums until Dec. 31, 2010. The act also expands the number of individuals eligible for the HCTC by continuing the credit for family members even after a divorce, or after the eligible employee becomes entitled to Medicare or dies.

Eligible individuals can receive the tax credit monthly to offset their premiums or claim the credit on their annual tax returns. To be eligible, individuals must be receiving TAA income support (or would be eligible for income support if they weren’t receiving unemployment compensation) or receiving wage insurance benefits. PBGC recipients are eligible for the credit if they are at least 55 years old, receive benefit payments from the PBGC and cannot be claimed as a dependent on another taxpayer’s return. The tax credit is available to help workers pay for any of the following:

• COBRA or similar premiums
• Premiums under a spouse’s health plan (as long as the employer does not pay 50 percent or more of the premium)
• Coverage purchased in the individual insurance market
• Coverage otherwise designated as a state-qualified option

The HCTC is not available to individuals whose employers pay at least 50 percent of the health care premium or to those eligible for Medicare.

Expanded COBRA: TAA individuals, PBGC recipients and surviving dependents
The American Recovery and Reinvestment Act extends COBRA periods for TAA-eligible individuals and PBGC recipients if the COBRA-qualifying event is an involuntary termination or reduction in hours. If the covered employee has a nonforfeitable right to benefits payable by the PBGC, the COBRA period will be for the employee’s life, plus 24 months of coverage for surviving dependents. For covered employees who are TAA-eligible as of the date COBRA would otherwise end, the COBRA period will extend for the duration of the individual’s TAA eligibility — generally a maximum of 30 months.

The provision takes effect for COBRA periods that would otherwise terminate on or after the Feb. 17, 2009, date of enactment but will sunset on Dec. 31, 2010. So all extensions of COBRA under this provision will expire Jan. 1, 2011, unless Congress extends the sunset date.