COBRA Premium Subsidies under theAmerican Rescue Plan Act
On March 11, 2021, the American Rescue Plan Act (ARPA) was signed into law, with many of its provisions set to take effect April 1, 2021. Here is a breakdown of the information that we have at this time:
1) Between April 1 and September 30, 2021, employers who offer group health insurance plans that are subject to Federal COBRA requirements or comparable state continuation programs will be required to offer 100% subsidized continuation coverage (free COBRA) to eligible employees. 2) Employees who ARE eligible for these free COBRA premiums are: a) Anyone who is a qualifying plan participant who loses health insurance coverage due to an involuntary termination or a reduction in hours worked, and who elects continuation coverage to be effective during the April 1 through September 30, 2021 timeframe.
* These individuals will be eligible for the full 6 months of subsidized COBRA coverage unless they become eligible for another employer plan or Medicare b) Anyone who was a qualifying plan participant who did not elect COBRA coverage or who elected but discontinued COBRA coverage before April 1, 2021
* These individuals must still be within their maximum 18-month COBRA coverage period to be eligible. Given this, it is possible some individuals may qualify for subsidized COBRA coverage for a portion, but not all of, the 6-month period. It will be up to employers to flag these people and notify them accordingly. 3) Employees are NOT eligible if: a) They voluntary terminated their employment b) They are eligible or become eligible for another employer plan or Medicare * It will be up to the employee to notify the employer if they are no longer eligible 4) Employers who are required to comply with this provision must provide notice to their eligible employees as follows:
Special Election Notice: This notice must be provided to eligible individuals who previously elected but discontinued their COBRA coverage prior to April 1, 2021, or who declined COBRA previously but are still within their COBRA coverage eligibility period. Notice must be provided no later than May 30, 2021 and eligible individuals will have 60 days from receipt of the notice to elect subsidized COBRA coverage.
General Election Notice: This notice must go to employees who first become eligible for subsidized coverage during the period between April 1 and September 30, 2021. It must generally notify eligible individuals about the availability of premium assistance and include other details about how this subsidized coverage will be administered.
Expiration of Subsidy Notice: This notice requirement will alert eligible individuals that their subsidized coverage will expire on a particular date. It must be provided no earlier than 45 days before the expiration and no later than 15 days before the subsidy is set to expire.
* The Department of Labor is expected to issue model notices by April 10, 2021. When these are available, Easytrack will send an email with further details. 5) Payment of Premiums and Reimbursement: a) Employers will assume the responsibility of paying full COBRA premiums for eligible individuals during the 6-month subsidized period b) Employers who provide this subsidized coverage will be reimbursed for the costs of the coverage (during the period April 1 through September 30, 2021) through tax credits against their payroll taxes * The IRS is expected to provide further guidance on this, which Easytrack will pass along as we get it. ** IMPORTANT: Until we have further guidance, if you provide subsidized coverage any time from April 1 through September 30, 2021, please keep a record of all costs associated with this coverage so that Easytrack can include these costs when applying the credit against your payroll taxes. 6) In preparation, you can do the following:
a) Contact your Health Insurance Broker or Third Party Administrator to discuss how they may be able to assist you with compliance b) Start identifying employees who are or may become eligible for this subsidy c) Review your company's COBRA communications that you provide to employees upon termination and begin coordinating updated notices per the ARPA requirements * Any HR-related questions should go through your Health Insurance Broker, Third Party Administrator, and/or HR Advisor. Easytrack will only be able to assist with the payroll tax credits associated with this provision. We will post further information as soon as it becomes available.