Yesterday, the Department of Labor released Frequently Asked Questions and model notices and election forms in connection with the American Rescue Plan Act (“ARPA”) COBRA premium subsidy. The model notices and election forms may be used by employers to notify Assistance Eligible Individuals of the availability of the COBRA premium subsidy.
Background. The ARPA provides Assistance Eligible Individuals with a 100% COBRA premium subsidy for medical, dental, and vision coverage.
An Assistance Eligible Individual is a COBRA qualified beneficiary who, during the period from April 1, 2021 to September 30, 2021 (i) is eligible for COBRA by reason of a reduction in hours of employment (e.g., a change from full-time to part-time or temporary leave of absence) or an involuntary termination of employment, and (ii) elects COBRA.
This includes:
- individuals who become COBRA eligible on or after April 1, 2021 (“new qualified beneficiaries”),
- current COBRA enrollees, and
- individuals who became COBRA eligible within the 18 months prior to April 1, 2021 (i.e., November 2019 and later) who (i) do not have a current COBRA election because they did not elect COBRA or elected COBRA but stopped paying premiums, and (ii) elect COBRA during the ARPA extended election period (“second-chance qualified beneficiaries”).
The subsidy is not available to individuals who are eligible for another group health plan or Medicare (regardless of whether they actually enroll in that other coverage). Individuals who initially qualify for the subsidy but later become eligible for other coverage must notify the group health plan providing their subsidized COBRA and are subject to income tax penalties for failing to do so.
Additionally, the subsidy does not extend the length of COBRA coverage available (e.g., if an Assistance Eligible Individual’s 18-month COBRA period expires June 30, 2021, COBRA coverage and the subsidy will end June 30, 2021).
Notice Requirements. Employers must provide notice of the premium subsidy to Assistance Eligible Individuals, and may use the new DOL model notices to satisfy these new notice requirements.
- The Model General Notice and COBRA Continuation Coverage Election Notice and related election form may be used notify new qualified beneficiaries of the premium subsidy. Generally, the notice must be provided to new qualified beneficiaries within 44 days of the individual’s loss of coverage.
- The Model Notice in Connection with Extended Election Period and related election form may be used to notify current COBRA enrollees and second-chance qualified beneficiaries of premium assistance eligibility. The notice must be provided to current COBRA enrollees and second-chance qualified beneficiaries no later than May 31, 2021.
Employers are also required to notify Assistance Eligible Individuals before their subsidy expires (other than individuals who lose subsidy eligibility due to eligibility for other coverage). The Model Notice of Expiration of Period of Premium Assistance may be used for this purpose.
Next Steps. Employers will need to continue to work with their COBRA administrators to identify all Assistance Eligible Individuals and provide notice regarding the premium subsidy.
If an individual qualifies as an Assistance Eligible Individual, the employer will pay the entire COBRA premium on behalf of the Assistance Eligible Individual (e.g., through a direct billing arrangement with the COBRA administrator or the medical, dental, and vision vendors) and obtain the subsidy through a payroll tax credit against quarterly taxes. Accordingly, employers will also need to begin coordinating with their payroll and/or accounting departments to ensure the employer receives the payroll tax credit.
Please contact your SGR Executive Compensation and Employee Benefits Counsel at Smith, Gambrell & Russell for more information.