American Rescue Plan Act and New COBRA Subsidy
The American Rescue Plan Act (ARPA) that was signed into law on March 11, 2021 contains a provision related to COBRA benefits. Specifically, the ARPA provides for COBRA premium assistance to help “Assistance Eligible Individuals” continue their health benefits. The premium assistance applies to periods of health coverage on or after April 1, 2021 through September 30, 2021. An employer or plan to whom COBRA premiums are payable is entitled to a tax credit for the amount of the premium assistance.
Assistance Eligible Individuals are those employees who lost employer-subsidized group coverage because they involuntarily had their working hours reduced or involuntarily had their employment ended. The reduction in hours or job loss need not be directly caused by the COVID-19 pandemic. Notably, voluntary termination of employment and those employees terminated for gross misconduct are not eligible for the new COBRA benefit.
The Department of Labor recently issued guidance on the premium assistance under ARPA. However, the guidance does not cover nuances such as what is an ‘involuntary termination’ in order to qualify for subsidized coverage. The Department of Labor also published model notices for employers to use. These include:
- Model General Notice of COBRA Continuation Coverage Election Notice, to be used when a qualified beneficiary loses health coverage due to reduction in hours or involuntary termination with COBRA beginning between April 1, 2021 through September 30, 2021;
- Model Notice in Connection with Extended Election Periods, to be used to notify Assistance Eligible Individuals who are still in their 18-month COBRA window in April 2021 (individuals who were involuntarily terminated or saw reduction in hours on or after October 1, 2019). Employers must provide this notice to these individuals prior to May 31, 2021;
- Model Alternative Notice, which is for COBRA coverage subject to state health plan continuation requirements;
- Model Notice of Expiration of Premium Assistance, which must be sent Assistance Eligible Individuals 15 to 45 days before their COBRA subsidy will expire. Note, this does not need to be sent if the individual is losing the subsidy due to becoming eligible for other group health plan coverage or Medicare.
- Summary of COBRA Premium Assistance Provisions under ARPA, which includes a form for employees to request treatment as an Assistance Eligible Individual.
Employers should begin to review their records for Assistance Eligible Individuals sooner rather than later to meet the new notice and coverage obligations required by ARPA. For questions about this or any other labor and employment law topic, please do not hesitate to contact the attorneys at Hoffman & Hlavac. To stay updated on the key labor and employment developments that affect your workplace, subscribe to our blog and follow us on social media.