as of April 13, 2021
The American Rescue Plan Act of 2021 (“ARPA”), signed into law in March 2021, created a COBRA subsidization program that will apply from April 1, 2021, to September 30, 2021, for individuals who lost their group health coverage due to an involuntary termination or reduction in hours. The subsidy is available to those people currently enrolled as well as those who are within their COBRA continuation window but who failed to elect or previously dropped coverage. Those who discontinued coverage will have a chance to elect COBRA again beginning April 1, 2021, and ending 60 days after they receive the extended election notice discussed below.
This program requires employers to pay the cost of the individual’s COBRA premium, but the employer can then obtain reimbursement through payroll tax credits against quarterly Medicare taxes. The premium assistance is available for continuation coverage under the federal COBRA provisions and also for group health coverage under state continuation coverage laws (often called “mini-COBRA”).
Importantly, employers are required to distribute the new ARPA election notice by May 31, 2021. The Department of Labor (“DOL”) recently provided model election notices that employers can use to satisfy this obligation. Any coverage elected by an individual will be effective retroactive to the first period of coverage beginning on or after April 1, 2021, or the individual can elect to enroll prospectively. Employers cannot charge individuals any administrative fee or other costs associated with coverage continuation. Employers must also send covered individuals a notice about the expiration of the premium assistance in the 15-45 days before their premium assistance expires.
Individuals are not eligible for the ARPA premium subsidy if they are eligible for other group health coverage, such as through a new employer’s plan or a spouse’s plan, or if the individual is eligible for Medicare. Also, an employee terminated for “gross misconduct” is not eligible for the ARPA subsidy.
The DOL has issued Frequently Asked Questions about the ARPA COBRA subsidy along with model notice forms, which are available on the DOL website.
Stoneman, Chandler & Miller LLP can help you address these recent developments. If you have any questions on the above, please do not hesitate to contact us.
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