As the COBRA subsidy period comes to an end on September 30, 2021, plans are required to send a notice 15 to 45 days before an assistance eligible individual’s (“AEIs”) subsidy ends. For AEIs whose subsidy period will end on September 30th, notices must be sent no later than September 15th. The notice must describe:
- the subsidy expiration date;
- the right to continue COBRA coverage without the subsidy for the remainder of the individual’s maximum coverage period (if applicable); and
- other coverage options that may be available.
See the model COBRA premium subsidy expiration notice found on the DOL website.
Does the COBRA subsidy period end for all AEIs on September 30th?
In general, the COBRA premium subsidy for an AEI ends on the earliest of:
- the end of the AEI’s maximum COBRA coverage period;
- the first month after the AEI becomes eligible for other disqualifying health coverage; or
- September 30, 2021 (the end of the subsidy period as set by the American Rescue Plan Act.
Note: The IRS has clarified that, under certain circumstances, subsidy availability will not be cut off on September 30th, instead, the subsidy will continue until the end of an AEI’s last period of coverage that begins on or before September 30th. (For this purpose, a “period of coverage” is a month or shorter period for which COBRA premiums are typically charged by the plan.) For example, if a plan typically collects COBRA premiums on a biweekly basis, including for the period beginning September 26th and ending October 9th , that plan’s AEIs will continue to receive the subsidy through October 9th . At that point, the AEIs may choose to discontinue COBRA coverage or, if they are still within their maximum COBRA coverage period (typically 18 months), they may continue coverage without the subsidy at the plan’s usual rates.
Take Away
It’s important that Employers meet the COBRA subsidy notice deadlines to ensure AEIs know their options when the subsidy ends. Feel free to contact the Contribution Health Compliance Team with questions.
Please be aware that the determination of the requirements and the application of specific laws and regulations to this topic may differ due to a number of variables. Nothing in this newsletter should be construed as tax or legal advice.