Among other things, the recently passed American Rescue Plan Act of 2021 (“ARPA”) provides a COBRA premium subsidy from April 1, 2021 to September 30, 2021 (the “subsidy period”) for each assistance eligible individual (including former employees and eligible members of their families). This provision requires employers to cover 100% of the employee’s cost of continuing coverage under COBRA during the subsidy period if the employee lost coverage due to a reduction in hours or involuntary termination (not including terminations for gross misconduct).
The subsidy is only available to those whose initial COBRA period ends (or would have ended if COBRA had been elected or did not lapse) either during or after the subsidy period. The COBRA subsidy does not extend the COBRA period, so if a former employee’s COBRA period begins after April 1, 2021, or ends before September 30, 2021, the subsidy will be for a shorter time period than the full 6 months.
For COBRA beneficiaries who elected and are covered under COBRA on April 1, 2021, when this subsidy goes into effect, no additional enrollment is necessary. For those who did not initially elect COBRA, or who let COBRA lapse, there will be a special enrollment period to elect coverage.
Employers and benefit providers will need to identify assistance eligible individuals and provide notice about this new benefit and special enrollment period. COBRA notices for individuals who become eligible to elect COBRA in the subsidy period must include:
- A description of the extended election period;
- A description of the assistance eligible individual’s obligation to notify the plan of eligibility for other group health coverage, and a description of the penalties for failure to comply; and
- A description of the subsidy.
COBRA beneficiaries must also receive a termination notice before the new subsidy terminates.
The DOL will make model notices available by April 10.
While employers must front any COBRA premium owed to a provider or plan administrator, the government will provide a dollar-for-dollar tax credit to employers on their quarterly payroll filings.
If you have questions about complying with this new provision of ARPA, reach out to the attorneys at myHRcounsel.