Re: 2009 Recovery Act: Tax Benefits for Unemployed Workers

Dear Client:

Due to the current economic crisis, more Americans every week are finding themselves unemployed. Many are
struggling to make payments to continue health insurance benefits for themselves and their families and wonder
how they will pay income taxes on their unemployment benefits. The American Recovery and Reinvestment Tax
Act of 2009 (2009 Recovery Act) provides some relief from the financial burdens associated with unemployment
through a partial exclusion from income for unemployment benefits and a 65 percent subsidy of COBRA
premiums. These benefits may be available to you and your family.

As you may know, unemployment compensation benefits generally are taxable as ordinary income, and
unemployed individuals may elect to have withholding taken from their benefit checks. Under the 2009 Recovery
Act, however, for 2009 an individual may exclude up to $2,400 of unemployment compensation benefits from
gross income.

The 2009 Recovery Act also provides assistance with payment of COBRA premiums for workers who are
involuntarily unemployed. Under these provisions, an individual who properly elects COBRA and pays 35 percent
of the applicable premiums is deemed to have paid the full premium. In effect, individuals are provided with a 65
percent reduction in premiums, and that reduction is not taxable. If you became unemployed between September
1, 2008 and February 17, 2009, and did not elect COBRA continuation coverage because of its expense, the 2009
Recovery Act allows you an additional 60 days from February 17, 2009 to elect coverage and receive the
COBRA subsidy. The subsidy is only available for nine months, but it gives unemployed workers and their
families some breathing room while they search for new employment. The subsidy is recaptured in income for
certain high-income individuals.

Applicable medical continuation coverage that qualifies for the subsidy is not limited to coverage required to be
offered under COBRA, but also includes continuation coverage required under state laws similar to COBRA
(e.g., a small employer plan) as well as continuation coverage applicable to health plans maintained by the
Federal or state governments.

Please contact us to discuss how you and your family can benefit from these relief provisions. We would be
happy to arrange an appointment at your convenience.

Sincerely yours,