Employers should be aware that the American Rescue Plan Act, (the “ARPA”), a COVID-19 relief package, signed into law on March 11, 2021, provides for COBRA premium assistance for certain qualifying employees (and their covered dependents) who lost, or will lose, their group health plan coverage due to (i) involuntary termination or (ii) a reduction in hours. Specifically, employers are required to pay or advance 100% of COBRA premiums for those individuals (and their covered dependents) for up to six months, from April 1, 2021 to September 30, 2021. The subsidy requirement applies to major medical, dental and vision plans offered by employers, but not health flexible spending accounts.
1. Who Must Provide Premium Assistance?
Employer-sponsored health insurance plans that are subject to federal COBRA requirements or comparable state continuation programs like the North Carolina health continuation law must offer fully subsidized continuation coverage to eligible individuals between April 1, 2021, and September 30, 2021.
2. Employee Eligibility
Employees (and their covered dependents) who are eligible for COBRA coverage due to the employee’s involuntary termination or a reduction in hours, and who elect COBRA coverage must receive the 100% premium assistance during the time period set forth below.
Employees who are terminated for gross misconduct are not eligible for this subsidy, nor are employees who qualify for COBRA due to voluntary resignation.
3. Premium Assistance Period
Eligible individuals are entitled to the 100% COBRA premium subsidy advanced or paid by their employer from April 1, 2021 through the earlier of:
- September 30, 2021
- the end of the individuals’ COBRA coverage period, or
- the date on which the individual obtains other group healthcare coverage or Medicare.
The ARPA does not lengthen the 18-month COBRA period. Accordingly, those eligible for premium assistance will generally be those employees who were first eligible for COBRA coverage in November 2019 or later.
The ARPA allows otherwise eligible individuals who previously declined COBRA coverage, or let their coverage lapse, to elect COBRA coverage beginning April 1, 2021 and receive premium assistance – as long as they elect COBRA coverage within 60 days of receiving required notice from their employer (see below).
4. Employer Reimbursement
Employers who comply with the ARPA’s COBRA provisions will be reimbursed for the costs of the subsidized coverage through tax credits against their quarterly payroll taxes. Credit amounts exceeding Medicare taxes will be treated as a refund of a Medicare tax overpayment.
The IRS is expected to issue further guidance on how these credits will work.
5. Additional Employer Notice Requirements
Under the ARPA, employers must send a second notice to employees in addition to the general election notices to all employees who are eligible for subsidized COBRA coverage. This second required notice must inform eligible individuals of the available premium assistance and provide other details concerning the administration of the subsidized coverage. Employers must also send notices to individuals who are eligible for the extended election period discussed above.
For individuals who became eligible for COBRA prior to April 1, 2021, notices must be sent by May 31, 2021. For individuals who become eligible for COBRA after April 1, 2021, the subsidy notice should at the time that usual COBRA election notices are provided.
The U.S. Department of Labor has recently issued additional guidance and model notice which can be accessed at the links below:
https://www.dol.gov/agencies/ebsa/laws-and-regulations/laws/cobra/premium-subsidy
If you have any questions regarding the ARPA COBRA Premium Assistance Program or how it may impact your business, please contact Will Cherry, Jennifer Weaver or your Manning Fulton relationship attorney.
