In connection with the 65% COBRA subsidy that went into effect earlier this year, there is a provision that provides that an individual is no longer eligible for the subsidy if they are eligible for other coverage, including Medicare.  This means that if an employee is receiving the COBRA subsidy and gets a new job and becomes eligible for coverage with that new employer, they are no longer eligible for the 65% premium subsidy.

The IRS has clarified that an individual who is receiving the subsidy is under an affirmative obligation to notify their old employer that they are eligible for other coverage and that they must cease receiving subsidy payments.  Individuals who continue to receive subsidy payments after they are eligible for other coverage are subject to a penalty under new IRC Section 6720C.  That penalty is 110% of the subsidy obtained after the date of eligibility for new coverage. 

The model notices issued by the IRS included a model form for notifying plans that the employee is eligible for other coverage.  In addition, the IRS has provided that anyone who suspects that an individual is receiving a subsidy after they become eligible for other coverage may report the violation to the IRS using form 3949-A (Information Referral).  Click here of a copy of the form.