On March 11, 2021 President Biden signed the American Rescue Plan Act (“ARPA”) into law. This legislation mandates, among other things, that employers provide 100% COBRA premium subsidies during a subsidy period between April 1, 2021 and September 30, 2021 to COBRA-eligible employees and their qualified beneficiaries who lose (or have lost) health insurance coverage based on “involuntary termination” (other than for “gross misconduct”) or a reduction in hours that results in a loss of coverage any time between November 1, 2020 and September 30, 2021. If an individual’s 18 months of COBRA coverage expires during the subsidy period, ARPA does not extend their eligibility. Employers pay the premiums out of pocket but receive tax credits against their Medicare tax liability for all amounts paid. (Other COBRA-triggering events do not qualify for the subsidies, and are not eligible for the tax credits.) Although contained in a pandemic relief package, none of these “involuntary terminations” necessarily need to be in any way COVID-related.
ARPA further allows employees (and their beneficiaries) who lost coverage any time on or after November 1, 2019 because of “involuntary termination” (other than for “gross misconduct”) or a reduction of hours who did not elect COBRA coverage in real time, or let their coverage lapse, a second chance to elect COBRA. If they so elect, their coverage is prospective only – not retroactive to the earlier coverage loss.
The ARPA COBRA Premium Assistance affects any employer that has had a Reduction in Force, furlough, and/or layoff since November 1, 2020 (or that has such events any time between now and September 30, 2021). The obligation also applies to other individual “involuntary” separations (unless for “gross misconduct”) between November 30, 2020 and September 30, 2021. IRS guidance issued on May 18, 2021 clarified that if an employee is allowed to resign in lieu of termination, that is an “involuntary termination” that qualifies for the COBRA subsidy. IRS Guidance.
By May 31, 2021 every employer subject to COBRA (or their COBRA administrator), with employees eligible in the past 18 months, must send notices about these ARPA rights to all eligible employees. The DOL published model notices on April 8, 2021. DOL Model Notices.
This quick reminder does not explain all of the nuances of the ARPA COBRA Subsidy – much less other provisions of ARPA. Here’s a link to a very helpful article on these COBRA subsidies and required Notices. National Law Review ARPA’s COBRA Subsidy. If you have further questions, check with us at FineLine HR Consulting.
