Under the American Rescue Plan Act (ARPA), certain individuals are eligible to receive fully subsidized COBRA coverage for a six-month period which began on April 1, 2021. The APRA also requires that employers notify affected individuals of this benefit by May 31, 2021. Thankfully, last week, the Department of Labor issued template notices and a FAQ on these topics.
To provide a recap, the ARPA defines those (and their covered family members) who can receive the COBRA premium subsidy as “assistance eligible individuals.” An assistance eligible individual is someone who: is otherwise eligible for COBRA coverage as a qualified beneficiary because their employer plan coverage ended as a result an involuntary termination of employment or reduction in hours; and their COBRA period includes months between April 1 and September 30, 2021. An employee who voluntarily terminates their employment is not eligible. Assistance eligible individuals receiving the subsidy are required to provide notice if they become eligible for other employer coverage or Medicare, at which point they are no longer eligible for the subsidy.
Employers have two options to provide the subsidy – by either providing the COBRA coverage at no cost to the assistance eligible individuals or by covering the cost charged by the insurer. After the employer provides the subsidy, it may take a payroll tax credit equal to the cost of coverage.
The ARPA also puts the burden of providing notice to affected individuals upon employers. First, as noted above, employers must notify assistance eligible individuals of their right to receive the COBRA subsidy by May 31, 2021. Employers must provide this notice to individuals currently receiving COBRA coverage and those who previously waived or dropped coverage but are still within their eligible coverage period. If an assistance eligible individual previously waived or dropped COBRA coverage, they have 60 days from their receipt of the notice to make an election to start or reinstate coverage. In addition, employers must update their standard COBRA notice for qualifying events that occur after April 1, 2021. Finally, employers will have to notify assistance eligible individuals prior to the expiration of their subsidies. This additional notice must be provided between 15 and 45 days prior to the end of the subsidies for the individual(s).