The American Rescue Plan Act of 2021 (“ARPA”) subsidizes the full COBRA premium for Assistance Eligible Individuals (“AEIs”) for six months between April 1, 2021 through September 30, 2021. To be eligible for this premium assistance, the AEIs must:
- MUST have a COBRA qualifying event that is a reduction in hours or an involuntary termination of a covered employee’s employment;
- MUST elect COBRA continuation coverage;
- MUST NOT be eligible for Medicare; AND
- MUST NOT be eligible for coverage under any other group health plan, such as a plan sponsored by a new employer or a spouse’s employer.
The ARPA funds the COBRA subsidies by providing a payroll tax credit to self-funded employers. Individuals who previously declined COBRA coverage, or who had COBRA coverage but then discontinued it, are also eligible to elect the subsidized COBRA coverage.
Model Notices Available
Employers have various timeframes to provide applicable notices to individuals who may be impacted by the COBRA subsidy relief and the Department of Labor has created a webpage dedicated to this COBRA subsidy which includes Q&As and the Model Notices. Model Notices on the DOL website include:
- General Notice and Election Notice;
- Notice in Connection with an Extended Election Period;
- Alternative Notice;
- Notice of Expiration of Premium Assistance; and
- Summary of the COBRA Premium Assistance Provisions.
Visit the DOL COBRA Premium Subsidy site at https://www.dol.gov/agencies/ebsa/laws-and-regulations/laws/cobra/premium-subsidy.
Q&A Key Points
- The subsidy applies to all benefits that are subject to COBRA (including medical, dental, vision, HRA), except for health flexible spending accounts.
- The subsidy is available to all qualified beneficiaries, including spouses and children who lost coverage.
- Involuntary termination or reduction of hours encompasses any causes, whether or not the cause is related to COVID.
- Individuals who are eligible for state continuation (mini-COBRA) can receive subsidized premiums.
- Individuals enrolled in individual or Marketplace coverage can terminate that coverage and enroll in subsidized COBRA.
- When the COBRA subsidy ends, individuals will be able to enroll in Marketplace coverage as a special enrollment even if the COBRA coverage period has not expired.
Please be aware that the determination of the requirements and the application of specific laws and regulations to each employee welfare plan and/or employer may differ due to a number of variables. Nothing in this newsletter should be construed as tax or legal advice.