What Is The Cobra Subsidy? (Solved)

Who pays COBRA insurance?

  • You (the former employee) pay for coverage. When you’re employed, your employer often pays a portion of the group health coverage premium, and you pay the rest. However, under COBRA you are now responsible for the full premium plus an administrative fee.

What does COBRA subsidy mean?

The state law is called Cal-COBRA (sometimes also called “ supplemental COBRA ”). The law is sometimes referred to as ARPA. ARPA provides premium assistance equal to 100% of the amount of the premium for eligible individuals to continue their employer-provided health care coverage after a job loss or reduction in hours.

Who gets the Cobra subsidy?

To receive COBRA premium assistance, an individual must be an “Assistance Eligible Individual,” which is defined in Notice 2021-31 as any individual who: (1) is a qualified beneficiary as the result of the covered employee’s reduction of hours or involuntary termination of employment; (2) is eligible for COBRA coverage

What is the Cobra subsidy 2021?

The American Rescue Plan Act of 2021 (ARPA) provides for a 100% COBRA premium subsidy for up to six months, from April 1, 2021 through September 30, 2021, for Assistance Eligible Individuals (AEIs) as defined under the guidance.

How do I get a 2021 COBRA subsidy?

How Does the COBRA Subsidy Work?

  1. An Employee Becomes Eligible for COBRA: Typically as a result of termination or a reduction in hours.
  2. The Employer Notifies All Qualifying Employees About the COBRA Subsidy: This was to be done beginning April 1, 2021, within 60 days of the employee’s qualifying event.

How does the new COBRA subsidy work?

Under the ARPA, the federal government will pay 100 percent of COBRA insurance premiums for eligible employees who lost their jobs and for their covered relatives through September 2021, allowing them to stay on their company-sponsored health plan. 30, 2021, they must be issued a refund within 60 days.

How are employers reimbursed for COBRA subsidy?

Employers who provide ARPA COBRA subsidies can claim a tax credit against their Medicare tax obligations. The ARPA tax credit is fully refundable, which means that employers can receive a payment from the IRS if their credit exceeds their Medicare obligations in a calendar quarter.

How long is the Cobra subsidy?

The ARPA also requires that health plans provide AEIs with a Notice of Expiration of Premium Assistance that explains the subsidy will expire soon for them—either because their COBRA eligibility has reached its maximum time limit ( generally 18 months ) or because the subsidy period is ending as of Sept.

How long does the Cobra subsidy last?

When Federal COBRA ends, eligible employees can buy 18 months additional health coverage under Cal-COBRA. All qualified beneficiaries are generally eligible for continuation coverage for 36 months after the date the qualified beneficiary’s benefits would otherwise have terminated.

Is government paying for COBRA insurance?

The government will cover 100% of your COBRA premiums. You could still be on the hook for any copays and deductibles.

Will the Cobra subsidy be extended past September 2021?

COBRA Subsidy Under the American Rescue Plan of 2021 ends September 30, 2021. The American Rescue Plan Act of 2021, the most recent stimulus and COVID-19 relief package, requires employers to extend offers of free COBRA coverage to certain qualified employees from April 1 through September 30, 2021.

Will the Cobra subsidy be extended?

The American Rescue Plan provides subsidies to cover the full cost of COBRA premiums for displaced workers through September 30, 2021. This legislation would extend these subsidies through September 30, 2022. Currently, nearly 56 percent of American workers are insured through their employer.

How do I get reimbursed for COBRA payments?

The premium will be reimbursed directly to the employer, plan administrator, or insurance company through a COBRA premium assistance credit. 1. Plans and issuers were required to notify eligible employees who had a qualifying event before April 1, 2021 about their right to COBRA premium assistance by May 31.

Is COBRA free in 2021?

COBRA is a continuation of the same health insurance policy that you had through your job. Free premiums began April 1, 2021, and end September 30, 2021. Benefits end earlier if your maximum period of COBRA coverage (usually 18 months) ends or if you become eligible for Medicare or another group health plan.

Did the Cobra subsidy end?

With the COBRA subsidy period set to expire on September 30, 2021, plan administrators are required to notify AEIs of the subsidy’s expiration.

Will Biden extend COBRA insurance?

Included in Biden’s $1.9 trillion rescue plan are provisions that expand the pool of recipients eligible for receiving COBRA. Specifically, individuals that declined COBRA coverage, or previously elected to receive COBRA coverage but discontinued it, effectively gain another opportunity to receive COBRA coverage.

7 Perplexing COBRA Subsidy Questions Answered

The new 100 percent premium subsidy under the American Rescue Plan Act (ARPA) applies to individuals who are eligible for COBRA coverage as a result of either a reduction in hours or an involuntary termination of employment, and it is effective for the period beginning April 1, 2021, and ending September 30, 2021, respectively. The United States Department of Labor (DOL) has already developed model notification forms as well as preliminary advice, which includes a summary sheet and commonly asked questions (FAQs).

The following are responses to some of the most often requested and most fascinating inquiries we’ve received.

According to the rules of the plan, medical benefits are terminated at the conclusion of the sixth month, but the employee continues to be employed.

Yes.

  1. This covers time off for medical or disability-related reasons, as well as time off for personal reasons.
  2. The employee moved on to another organization, however his job with that company was recently terminated due to poor performance on his part.
  3. It’s possible to have both.
  4. The individual will be given the option of continuing their COBRA coverage.
  5. The ARPA mandates that subsidized COBRA coverage be made available to all persons, even those who have terminated or never elected COBRA coverage.
  6. What happens to those employees that the corporation knows are qualified for Medicare or another employer’s health insurance plan?
  7. Under the ARPA, all AEIs are obliged to be notified of their eligibility for premium assistance before receiving any benefits.

Individuals who are qualified for Medicare or who are covered by another employer’s plan are not eligible for the help.

The mailings must also include information on the $250 penalty that would apply if an individual does not enroll in subsidized COBRA if they are qualified for Medicare or another group health plan.

Question4If a company makes a taxable lump-sum cash payment intended to represent six months of COBRA premiums as part of a severance agreement, is the company eligible to claim a Medicare tax credit for the value of the lump-sum payment?

No.

Employers should be aware that a former employee who gets this sort of cash payout may choose not to enroll in COBRA coverage at all, in which case the employer would not be able to claim a tax credit for the cash lump-sum severance payment.

This would be consistent with instances in which AEIs are not obligated to pay COBRA premiums, rather than situations in which they receive funds that might be used to pay any needed premiums or for any other reason at their discretion.

Under this instance, it appears that the employee would be entitled for a subsidy until the conclusion of any waiting period in the other employer’s plan.

When it comes to any of those scenarios, though, waiting periods or other similar limitations may preclude a former employee from enrolling immediately.

It should be noted that, according to the sample notifications published by the DOL, eligibility for coverage does not include time spent in a waiting period for coverage.

Probably.

According to the example notice given by the Department of Labor, an employer may be required to submit a notification owing to the “termination of premium support.” Although the FAQ does not compel employers to check about other coverage, the fact that an individual is eligible for Medicare would exclude them from receiving the subsidy.

  1. Question7 An employee of a corporation was just sacked for being dishonest.
  2. If so, what is the definition of gross misconduct?
  3. According to most plans, an employee who has been dismissed because of egregious misbehavior is ineligible for COBRA benefits and would also be ineligible for the COBRA subsidy.
  4. In order for wrongdoing to be termed “gross,” it would most likely need to go above and beyond simple carelessness.
  5. Instead, there must be something outrageous about the employee’s misconduct—something willful or reckless—in order for it to be considered outrageous.
  6. It comes down to this: the employer must determine that the individual’s employment was terminated due to significant, willful wrongdoing in order to deny COBRA and the subsidy to that individual.
  7. Smithey is a co-chair of the employee benefits and executive pay practice group.
  8. In the Chicago branch of the business, Timothy J.
  9. Sizer are both attorneys.

All rights retained by Ogletree, Deakins, Nash, SmoakStewart, P.C. in the year 2021. This article has been republished with permission. SHRM Online has added hyperlinks to this page. Several minor changes have been made to this story from the original, which was published on the firm’s website.

IRS Issues New COBRA Subsidy Guidance as Deadlines Approach

Follow-up information for businesses on the federal government’s 100-percent premium subsidy for qualifying COBRA health care subscribers, which was passed earlier this year as part of the American Rescue Plan Act, was recently released by the Internal Revenue Service (IRS) (ARPA). In order to get the subsidy, assistance eligible people (AEIs) must enroll in COBRA coverage between April 1 and September 30. The sign-up period for the COBRA subsidy, which began after AEIs got a subsidy letter and concluded 60 days later, has come to a close for many of the company’s employees.

Important Dates and Deadlines According to instructions published by the United States Department of Labor in April, most AEIs should have received an updated COBRA notification by May 31 advising them of the subsidy.

Jobseekers who were laid off after April 1 would still be eligible for the subsidy up to and including September 30, and the standard COBRA notification requirements would apply:

  • Employers subject to COBRA regulations are expected to notify their group health plan administrator within 30 days after an employee’s termination of employment or reduction in employment hours.
  • The plan administrator is expected to advise the person of his or her COBRA rights within 14 days of receiving the notification. It is the employer’s responsibility to provide COBRA notices directly if he or she is also the plan administrator. In this case, the employer has the complete 44-day period in which to submit a COBRA election notice.

As soon as they receive notice, AEIs would have 60 days to reply, however the COBRA subsidy termination on September 30th may fall inside that time frame for individuals who have received COBRA notices. Notifications of Subsidy Expiration A Notice of Expiration of Premium Assistanceis also required by the ARPA, which informs AEIs that their subsidy will expire soon for one of two reasons: either because their COBRA eligibility has reached its maximum time limit (generally 18 months) or because the subsidy period is ending as of Sept.

In the case of group health plans, the notice of expiry should be sent to AEIs 15 to 45 days before their premium assistance ends.

New Recommendations Prior advice under Notice 2021-31 has been supplemented by IRS Notice 2021-46, which was published on July 25 and addresses problems regarding eligibility for and administration of the subsidy.

“The Q A guidance is intended to assist employers and their COBRA vendors/third-party administrators in determining who is an.” “As soon as practicable, plan sponsors should study the Q As contained in the IRS notice and discuss the implications of the Q As with their insurance carriers or third-party administrators.

The attorneys noted that “some insurers and plan sponsors who previously believed they would qualify as premium payees, and thus be entitled to claim the tax credit, may no longer be able to do so,” according to the attorneys.

A disability determination, a second qualifying event, or an extension under State mini-COBRA are all reasons why an AEI could be qualified for prolonged continuation coverage, according to the Groom law firm’s attorneys.

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They explain: Individuals who had a second qualifying incident or disability “while continuing to be covered by COBRA” were eligible for the subsidy, according to a previous IRS notice, Notice 2021-31, which was more restricted in scope, according to TRI-AD.

When an AEI previously elected COBRA continuation coverage for dental-only or vision-only coverage, the notice clarifies that their subsidy eligibility ends when the AEI becomes eligible for any other disqualifying group health plan or Medicare, regardless of whether the new coverage includes dental or vision coverage.

State-sponsored coverage for the foreseeable future Regardless of whether or not the state program covers a large proportion of state residents, the notification verifies that individual-state continuation coverage provides equivalent coverage to COBRA continuation coverage (and, thus, allows AEIs to qualify for the subsidy).

This is true even if state-mandated continuation coverage requires the AEI pay premiums directly to the insurer after the period of federal COBRA expires, as provided in the notice.

Employers must declare the credit and the number of persons who received help on their federal employment tax returns, which are typically Form 941 and are normally due by the last day of the month after the end of the current quarter, in order to claim the premium assistance credit.

According to the Groom Law Group, certain employers “may now be required to make modifications. to their Form 941 filings.”

Guide to New IRS Guidance on COBRA Premium Subsidy

The Internal Revenue Service (IRS) issued Notice 2021-31, which provides implementation guidelines on the COBRA premium subsidies provided under the American Rescue Plan Act of 2021, which was published on May 18, 2021. (ARP). As previously noted in our blog postings, the ARP contains a 100 percent COBRA premium subsidy for qualified persons during periods of COBRA continuing coverage from April 1, 2021 through September 30, 2021, as long as they meet the other requirements. The information in Notice 2021-31 is particularly useful for employers and plan sponsors who are responsible for managing the COBRA premium subsidy and collecting the corresponding tax credit.

More information on the guidelines may be found in the sections below, and keep an eye out for future blog entries that will go deeper into the problems discussed below.

  • Affiliation with COBRA Premium Assistance and the ability to self-certify

An “Assistance Eligible Individual,” as defined in Notice 2021-31, is any individual who meets the following criteria: (1) is a qualified beneficiary as a result of the covered employee’s reduction in hours or involuntary termination of employment; (2) is eligible for COBRA coverage for some or all of the COBRA premium subsidy period (April 1, 2021 through September 30, 2021); and (3) elects COBRA.

It is confirmed in Notice 2021-31 that an employer or other plan sponsor may require people to self-certify or attest that they fulfill the eligibility criteria for the COBRA premium subsidy and that they are not eligible for any other disqualifying health coverage or Medicare.

The COBRA premium subsidy is available to individuals whose initial 18-month COBRA period was extended due to a disability determination, a second qualifying event, or an extension under State mini-COBRA, according to Notice 2021-31.

More information about this regulation, including what notices (if any) these persons are obliged to receive, would be beneficial for the purposes of putting it into effect.

  • In order to qualify for COBRA premium assistance, an individual must be a “Assistance Eligible Individual,” which is defined in Notice 2021-31 as any individual who: (1) becomes a qualified beneficiary as a result of the covered employee’s reduction in hours or involuntary termination of employment
  • (2) becomes eligible for COBRA coverage for some or all of the COBRA premium subsidy period (April 1, 2021 through September 30, 2021)
  • And (3) elects COBRA coverage during the COBRA premium subsidy period In Notice 2021-31, the Department of Labor clarifies that an employer or other plan sponsor may require people to self-certify or attest that they fulfill the eligibility criteria for the COBRA premium subsidy and that they are not eligible for other disqualifying health coverage or Medicare. To the extent that an employer or other plan sponsor does not have “actual” knowledge that an individual’s attestation is false, the entity may rely on that individual’s attestation in order to establish eligibility for the tax credit. Notice 2021-31, in a somewhat surprising twist, states that individuals whose initial 18-month COBRA period was extended due to a disability determination, a second qualifying event, or an extension under State mini-COBRA are eligible for the COBRA premium subsidy during their extended COBRA period, provided that the original qualifying event was a covered employee’s reduction in hours or involuntary termination of employment and the individual elected COBRA coverage and compensation. This rule’s context would be valuable for implementation purposes
  • For example, it would be helpful to know what notices (if any) these persons must get.

It is necessary for the eligible beneficiary to have lost coverage as a consequence of the covered employee’s “reduction in hours” or “unlawful termination of employment” in order to qualify as an Assistance Eligible Individual. In this regard, Notice 2021-31 gives guidelines on the concept of “involuntary” for this purpose, as well as instances of terminations stemming from workplace safety difficulties and difficulty to secure childcare during the epidemic.

As well as addressing difficulties connected to furloughs and work stoppages, the Notice provides instances of eligible terminations in the context of window arrangements and retirement.

  • Having insurance that qualifies for COBRA premium assistance

COBRA premium assistance is available for COBRA coverage that would otherwise be available under a group health plan subject to ERISA, the Internal Revenue Code, or the PHSA (with the exception of health FSAs), as well as coverage required by a state law that requires continuation coverage comparable to federal COBRA coverage (with the exception of health FSA coverage). A number of problems have been raised about the “kind” of COBRA coverage that is eligible for COBRA premium assistance, as addressed in Notice 2021-31.

In addition, the Notice provides guidance on which forms of state continuation coverage are eligible for COBRA premium assistance under certain circumstances.

For the most part, the Notice is mute on the topic of “who” is eligible for the extended election period—a point on which stakeholders had hoped for greater clarification from the Internal Revenue Service.

One point addressed in the Notice is that individuals who were offered COBRA coverage for both comprehensive medical and dental and vision coverage but who previously elected COBRA coverage only for dental or vision coverage must be offered the extended election period with respect to comprehensive medical coverage if they were previously offered COBRA coverage only for dental or vision coverage.

  • Consequences of Special Emergency Disaster Relief Programs

In response to the COVID-19 pandemic, the Department of Labor, the Department of Health and Human Services, and the Internal Revenue Service extended a special tolling period for certain employee benefit plan deadlines, including the deadline for qualified beneficiaries to elect COBRA coverage and make COBRA premium payments. Specifically, Notice 2021-31 confirmsthat the 60-day deadline for individuals who wish to elect COBRA continuation coverage with premium assistance, as well as the plan administrator’s obligation to provide extended election period notices by May 31, 2021, are not affected by this special tolling relief.

Continue to check this blog for more information on the relationship between the special tolling relief and COBRA premium assistance in a future article.

COBRA premium assistance is provided in the form of a tax credit, which allows the individual who would otherwise be responsible for paying COBRA premiums to claim a tax credit in the amount of the premium. In general, the credit for the applicable quarter is equal to the amount of COBRA premiums that are not paid by Assistance Eligible Individuals, plus any applicable administrative fees, that were not paid by the individual. Individuals who are not eligible for COBRA premium assistance may be eligible for a tax credit under the terms of Notice 2021-31.

In exchange for paying the COBRA continuation coverage premiums, the premium payee may be eligible for the COBRA premium assistance tax credit.

The Notice also includes instructions on how to claim the tax credit for premium payees who do not have any employment tax liability (for example, a multiemployer plan with no employees) as well as premium payees who use a third-party payer to report and pay employment taxes to the Internal Revenue Service (the IRS).

Keep an eye out for upcoming blog entries that will take a more in-depth look at the guidelines, including specifics on how to calculate and claim the COBRA premium subsidy tax credit in the future.

COBRA Health Insurance Continuation Premium Subsidy

If you are paying for COBRA continuation coverage, you may be eligible for a tax credit for COBRA premium assistance. In addition to providing information on “who” qualifies as a premium payee for the purposes of claiming the credit and “when” a premium payee can first claim the credit, Notice 2021-31 also provides information for premium payees who desire to obtain an advance of the expected tax credit. Also included in the Notice are instructions on how to claim the tax credit for premium payees who do not owe any employment taxes (for example, a multiemployer plan with no employees) as well as premium payees who rely on a third-party payer to report and pay employment taxes to the Internal Revenue Service.

Stay tuned for upcoming blog entries that will take a more in-depth look at the advice, including instructions on how to calculate and claim the COBRA premium subsidy tax credit in the near future.

Associated Terms: American Rescue Plan Act of 2021,ARP,COBRA,COBRA Subsidy,IRS,IRS guidance,notice 2021-31

Employers

Take a look at these resources:

  • Take a look at the following resources.

Employers should make use of the most recent version of:

  • In order to disclose their COBRA premium aid payments, they must file Form 941-X, Adjusted Employer’s Quarterly Federal Tax Return or Claim for Refund. Detailed instructions on how to complete lines 19a and 19b of Form 941-X, which pertain to COBRA premium assistance payments
  • And

Small businesses that fileForm 944, Employer’s ANNUAL Federal Tax Return — often those with an anticipated employment tax due of $1,000 or less in the calendar year — are eligible to claim their COBRA benefit onForm 944-X, which is a supplemental form to Form 944. Agribusinesses can also claim the COBRA credit on Form 943-X, Adjusted Employer’s Annual Federal Tax Return for Agricultural Employees or Claim for Refund, which is available through the Internal Revenue Service.

Employees and Former Employees

In accordance with the Recovery Act, qualifying individuals who lost their employment between September 1, 2008, and May 31, 2010, are entitled to a subsidy of up to 65 percent on COBRA continuation premiums for themselves and their families for a maximum of 15 months.

  • Workers who are eligible pay a portion of the premium to their former employers (35 percent)
  • You must have been involuntarily terminated from your work between September 1, 2008, and May 31, 2010 in order to be eligible. If you file a single return and your modified adjusted gross income exceeds $125,000 ($250,000 if you file a combined return), the amount of this subsidy is decreased by one-third. In the event that your modified adjusted gross income exceeds $145,000 ($290,000 for joint filers), you will not be eligible to receive the subsidy.

If Your Hours Were Reduced

People who become eligible for COBRA coverage as a consequence of a decrease in hours that occurs between September 1, 2008, and May 31, 2010, followed by an involuntary termination that occurs between March 2, 2010, and May 31, 2010, are also eligible for the COBRA subsidy. If you fall into this group, your subsidy will be accessible to you beginning with the first period of coverage after the involuntary termination of your insurance coverage. Individuals who did not enroll in COBRA coverage following the decrease in hours, or who did enroll but later canceled their coverage, will be given another opportunity to enroll in COBRA coverage.

The administrator of a group health plan or other body is required to provide notification of the new election as soon as possible following the involuntary termination of the group health plan.

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Questions and Answers

Interested in learning more? See our question and answer page for more information. Items that are related:

  • Forms and publications
  • The American Recovery and Reinvestment Act of 2009: Information Center
  • Forms and publications

IRS Issues Guidance on the American Rescue Plan Act COBRA Subsidy

As part of the American Rescue Plan Act (ARPA), which was signed into law on March 11, 2021, President Biden established a new, temporary COBRA subsidy. Companies must cover 100 percent of an employee’s cost of continuing group health coverage under COBRA from April 1, 2021 through September 30, 2021 if the employee lost their health insurance coverage as a result of a reduction in hours or an involuntary termination, according to the ARPA COBRA subsidy. On April 7, 2021, the Department of Labor provided answers to commonly asked questions (FAQs) pertaining to the ARPA COBRA subsidies and model notifications, as well as a list of frequently asked questions.

Specifically, Notice 2021-31 (the “Notice”) provides information on how to calculate the credit to multiemployer plans, employers, or insurers, how to determine whether an individual is eligible for the credit, how long the premium assistance period is, and other information that is important to employers, plan administrators, and insurers.

  1. Additionally, the Notice notes that the Internal Revenue Service is reviewing whether or not to give additional guidance on the COBRA subsidy in the future.
  2. Whether the ARPA subsidy would cover medical, dental, and vision care, or only medical coverage, has been unclear based on the language in the ARPA Act.
  3. Terminations that occur voluntarily vs those that occur involuntarily The ARPA subsidy is only available to persons who have lost their health insurance coverage as a result of an involuntary termination or a decrease in working hours.
  4. In the Notice, it is stated that this determination is to be made on a case-by-case basis and that it is dependent on the facts and circumstances of a specific termination.
  5. Factors that might be important in making this assessment include whether or not the employer would have terminated the employee’s services regardless of the resignation, and whether or not the employee was aware that the employee’s services were about to be discontinued.
  6. A required retirement, on the other hand, can be seen as an involuntary termination.
  7. According to the Notice, involuntary terminations will be considered when an employee’s departure is caused by a major change in the geographic location of work, or when an employee participates in certain voluntary window programs, among other reasons.

Look at Q as 30-34.

Individuals who have lost their health insurance coverage as a result of a reduction in working hours are also eligible for the ARPA subsidy.

Particularly in light of the reference to a valid labor strike, this section appears to be at odds with the barring of persons from receiving ARPA subsidies who choose to voluntarily end their work.

Self-Certification/Attestation An employer may require people to self-certify or attest that they are qualified for COBRA continuation coverage in the event of a decrease in hours or an involuntary termination of employment, according to the Notice, which can be seen here.

In order to get the ARPA credit, an employer may depend on these self-certifications/attestations; however, the self-certifications/attestations or other evidence that it utilizes to prove eligibility must be retained by the employer.

Individuals who initially elected COBRA because of an involuntary termination or reduction in hours and who remain on continuation coverage for an extended period (i.e., beyond 18 months) as a result of a disability determination, second qualifying event, or an extension mandated by state law will be eligible for the ARPA subsidy, according to the Notice.

Consequently, if an individual elects COBRA with an effective date of August 2019, they will be eligible for the ARPA subsidy even though the COBRA period began more than 18 months before the ARPA subsidy begins in April 2021.

A former employee who chose COBRA and continues on New York continuation coverage between April and September 2021 will be eligible for the ARPA subsidy for the duration of that coverage.

Employers Should Take the Following Steps Employers are required to provide notices to all persons who are eligible for the ARPA COBRA subsidy by May 31, 2021, or until the deadline has passed.

In many circumstances, the COBRA administrator assigned by the company will be in charge of this responsibility. Although the employer is ultimately responsible for COBRA compliance, the employer should make every effort to collaborate with its COBRA administrators in order to fulfill this deadline.

8 Things to Know About the New COBRA Subsidy

This week, the American Rescue Plan Act of 2021 (ARPA) was enacted by both the House of Representatives and the Senate. On March 11, 2021, President Donald Trump signed the measure into law. While the intricacies of the bill are still being worked out, here are eight things you should know about the COBRA subsidy that is contained in it.

1. It’s a 100% subsidy.

Despite the fact that there have been multiple modifications of the bill and subsidies, the final form provides a subsidy of 100 percent. This will allow qualified individuals to maintain their COBRA continuing coverage for their health plan without having to pay COBRA payments in the process.

2. It’s specific.

In order to qualify for the COBRA subsidy, premiums must be paid between April 1, 2021 and September 30, 2021, which is referred to as the “subsidy period.” Individuals must be during their 18-month Federal COBRA Coverage term in order to be eligible for this benefit.

3. Coverage is not automatic.

Premiums payable from April 1, 2021, through September 30, 2021, collectively referred to as the subsidy period, are eligible for reimbursement under COBRA only if they are paid by the COBRA subsidy. Individuals must be within the 18-month Federal COBRA Coverage term in order to be eligible for this benefit.

4. Employers are responsible for paying premiums, but receive a tax credit.

Employers who sponsor a group health plan will be responsible for paying the premiums to the health insurance companies that provide the coverage. It is anticipated that they would be compensated in full for their COBRA premiums through tax credits against certain payroll taxes.

5. New and previous qualified beneficiaries may be eligible.

When an employee is fired or has their working hours reduced, the COBRA subsidy is offered to them if they are or become qualifying beneficiaries under this provision. Individuals who fall within this category include those who:

  • Become eligible for COBRA during the subsidy period
  • Previously elected COBRA coverage and paid premiums for past months
  • Have not elected COBRA coverage but are still eligible to elect COBRA
  • Previously elected COBRA coverage and paid premiums for prior months

6. Eligible individuals will need to be notified.

In order to maintain their eligibility for COBRA and the COBRA subsidy, eligible persons will need to obtain an updated notification about their rights. After the bill is passed, the Departments of Labor and Health and Human Services are anticipated to release new model notifications within 30 days of the law’s implementation.

7. Subsidies apply to Group Health Plans, except FSAs.

The COBRA subsidy of 100 percent is applied to the underlying medical coverage, as well as dental and vision policies. Even if they choose coverage via an FSA, participants may still be liable for the rates (or other benefits being offered post-employment).

8. Individuals could elect to change coverage.

It is possible that an employer will allow employees to switch coverage options, but in that case, the premium subsidy must be greater than the cost of whichever coverage plan they were in at the time of the qualifying occurrence. As an illustration: Consider the following scenario: an employee was enrolled in Plan A at the time of termination, with a monthly premium of $500. The option to enroll in Plan B is available to them, but it comes at a cost of $700 a month. The total amount of the employee’s subsidy cannot exceed the initial monthly premium of $500.

Join Us for a Deep Dive

We will be presenting a thorough examination of COBRA subsidies and other recent legislative acts, and you are cordially invited to attend!

You may register today to attend our Legislative Frenzy: COBRA subsidies, pandemic periods, FSA relief, and morewebinar on April 8, 2021, which will be broadcast live.

The American Rescue Plan Act’s COBRA Subsidy Soon Expires & Employers are Required to Notify Impacted Individuals

NONPROFIT, PRIVATE EDUCATIONAL ENTERPRISES, PUBLIC EDUCATIONAL ENTERPRISE, PUBLIC EMPLOYERS, PUBLIC SECURITY ARE SOME OF THE CLIENT TYPES. The temporary health insurance premium subsidy provided to qualified persons under the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) and made available under the American Rescue Plan Act of 2021 (the ARP) will expire at the end of September 2021, unless extended by Congress. Employers should be aware of their legal responsibility to notify COBRA beneficiaries.

  • When an eligible individual experiences a COBRA-qualifying event, such as a decrease in hours or an involuntary termination of their work, the ARP gives a 100 percent subsidy of the monthly premium the client would otherwise be responsible for in order to maintain their COBRA coverage.
  • Individuals who are otherwise eligible for COBRA coverage at the time of the subsidy’s expiration will no longer be eligible for it after September 30, 2021.
  • Employers are required to submit this notification between 15 and 45 days before the individual’s premium subsidy is no longer in effect for him or her.
  • Most of the time, the expiry notification must be given between August 16 and September 15, 2021, for those whose COBRA coverage expires on or after September 30th, 2021.
  1. NONPROFIT, PRIVATE EDUCATIONAL ENTERPRISES, PUBLIC EDUCATIONAL ENTERPRISE, PUBLIC EMPLOYERS, PUBLIC SAFETY ARE THE TYPES OF CLIENTS WE SERVE. The temporary health insurance premium subsidy provided to qualified persons under the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) and made available by the American Rescue Plan Act of 2021 (the ARP) will expire at the end of September 2021, according to the ARP. The need to notify COBRA beneficiaries should be understood by employers. Employer group health plans are required to give qualifying individuals with a temporary extension of group health coverage that would otherwise be terminated under the COBRA program. When an eligible individual experiences a COBRA-qualifying event, such as a decrease in hours or an involuntary termination of their job, the ARP offers a 100 percent subsidy of the monthly premium the client would otherwise be responsible for in order to maintain their COBRA benefits. In the case of an employer or plan that is responsible for COBRA payments, the amount of the premium assistance is eligible for a tax credit. Individuals who otherwise qualify for COBRA coverage at the time of the subsidy’s expiration on September 30, 2021, will no longer be eligible for it. An additional requirement of the Affordable Care Act is that companies notify employees when their premium subsidies are about to expire. It is the employer’s responsibility to deliver this notification between 15 and 45 days before the individual’s premium subsidy is due to expire. This 15- to 45-day notification period may have already elapsed for eligible people whose COBRA coverage expires before September 30, 2021, depending on the precise end date of coverage for each employee. Most of the time, the expiry notification must be delivered between August 16 and September 15, 2021, for those whose COBRA coverage expires on or after September 30, 2020. Specifically, according to the US Department of Labor (DOL), the notification must contain the following information:

NONPROFIT, PRIVATE EDUCATIONAL ENTERPRISES, PUBLIC EDUCATIONAL ENTERPRISE, PUBLIC EMPLOYERS, PUBLIC SAFETY ARE SOME OF THE CLIENT TYPES. The temporary health insurance premium subsidy provided to qualified persons under the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) and made available under the American Rescue Plan Act of 2021 (the ARP) will expire at the end of September 2021. Employers should be aware of their legal responsibility to notify COBRA beneficiaries of their termination.

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When an eligible individual experiences a COBRA-qualifying event, such as a decrease in hours or an involuntary termination of their work, the ARP offers a 100 percent reimbursement of the monthly premium the individual would otherwise be required to pay for COBRA coverage.

Individuals who are otherwise eligible for COBRA coverage at the time of the subsidy’s expiration on September 30, 2021 will no longer be eligible for it.

Employers must deliver this notification between 15 and 45 days before the individual’s premium subsidy expires.

Individuals whose COBRA coverage expires on or after September 30, 2021, must send their expiry notification between August 16 and September 15, 2021, in the majority of cases. According to the United States Department of Labor (DOL), the notification must include the following information:

IRS Releases New Guidance Regarding Who Is Eligible for the American Rescue Plan Act’s COBRA Subsidy

The American Rescue Plan Act of 2021 (“ARPA”) was signed into law by President Barack Obama on March 11, 2021. ARPA changes who is responsible for paying for continuing health care under the Consolidated Omnibus Budget Reconciliation Act (“COBRA”). Individuals were expected to pay 100 percent of their own COBRA premiums prior to the passage of ARPA, as well as an administration cost of up to 2 percent. As part of the ARPA’s “COBRA subsidy” rule, which is in effect from April 1, 2020, to September 30, 2021, employers are required to offer COBRA coverage to “Assistance Eligible Individuals” (AEI) at no cost to the individual during that period.

  • Has lost coverage under an employer-sponsored health, dental, or vision plan as a result of a reduction in hours or an involuntary termination
  • Is within their initial 18-month COBRA coverage period (i.e., the loss of coverage must have occurred after October 1, 2019)
  • And is ineligible for other group health coverage or Medicare coverage.

In addition to plans provided by state or local governments, the COBRA discount is available to small governmental employers (those with less than 20 workers) who are free from federal COBRA but subject to California COBRA. Employers are have to pay the subsidy, but they will be able to recoup the expense through federal tax credits. To whom and by what deadlines must employers provide notice to AEIs? Employment-based insurers (AEIs) who first became eligible to elect COBRA before April 1, 2021 and have not reached the maximum period for their COBRA coverage (18 months) and/or failed to elect COBRA coverage when it was first offered must receive notice of the COBRA subsidy (as well as certain other COBRA rights under ARPA) by May 31, 2021.

AEIs then have 60 days from the date of the notification to choose COBRA coverage for themselves and their dependents.

Companies are also obligated to notify employees who have a COBRA-qualifying event between April 1 and September 30, 2021 with a generic ARPA COBRA notice to remind them of their eligibility for COBRA coverage as well as their entitlement to a COBRA subsidy under the law.

The following is a concise summary of the notification requirements:

  • By May 31, 2021, employers must provide notice of the premium subsidy and a second opportunity to elect COBRA to AEIs who experienced a qualifying event between October 1, 2019 and April 1, 2021 (including individuals enrolled in COBRA, those who did not elect COBRA, and those who elected COBRA and later dropped)
  • Within the typical 44-day time frame: For AEIs who experience a qualifying event between April 1, 2020, and September 30, 2021, the employer must give a COBRA election notification that includes information on whether or not the premium subsidy is available. Within 15–45 days before the subsidy is set to expire, you must: For AEIs whose subsidy is about to expire, whether because the AEI’s maximum COBRA continuation term is coming to an end or because the subsidy is about to expire on September 30, the employer is required to offer early notification of the imminent expiry of the subsidy.

The relevant notices will be prepared and distributed by the third-party COBRA administrator for the vast majority of employers. Employees with AEI status must be identified by their employers, and businesses must complete this identification procedure by May 31, 2021 in order to receive the first notice indicated in the preceding paragraph. It thus becomes necessary to ask the question of what exactly constitutes a “involuntary termination” for the purpose of qualifying an individual for the COBRA payment as an AEI.

The ARPA does not clarify what is meant by a “involuntary termination” of employment.

The Internal Revenue Service (IRS) issued Notice 2021-31 on May 18, 2021, to assist employers in understanding the new tax credit for the COBRA subsidy.

Aside from that, the Notice gives guidance in the following circumstances:

  • Termination for a constructive or valid cause. It includes an employee-initiated termination from work, in which the employee terminates owing to an employer action that results in a major unfavorable change in the employment relationship for the employee. Involuntary termination also includes termination from employment without cause. In the case of a major negative change, a material reduction in hours is included. Even when a termination is designated as voluntary, if the facts and circumstances indicate that the employer would have terminated the employee if the voluntary termination had not taken place, and the employee was aware that he or she was about to be terminated, the termination is deemed involuntary. The decision of the employer not to renew the employment contract of an employee. Involuntary termination could include the employer’s failure to renew an employee’s contract when it expires, even if the employee was willing and able to execute a new contract with terms and conditions similar to those in the expiring contract and to continue providing the services
  • The employer’s failure to provide the employee with a new contract when the existing contract expires
  • The employee’s refusal to provide the employer with a new contract when the existing contract expires
  • The employee’s refusal to provide the employer As a rule, a retirement is defined as a voluntary termination that does not result in the employee becoming eligible for the COBRA subsidy. Nonetheless, retirement may be included in an involuntary termination if the employer would have dismissed the employee regardless of whether he or she chose to retire and the employee was aware that he or she would have been terminated Illness or physical incapacity The action taken by an employer to terminate an employee’s employment while the employee is absent from work due to illness or disability is considered an involuntary termination if the employer has a reasonable expectation that the employee will return to work once the illness or disability has subsided. An absence from work due to sickness or disability without the employer’s action to terminate may nonetheless result in a “involuntary termination” if the employee’s hours are reduced in an involuntary manner and if the absence results in the loss of health insurance coverage. An involuntary termination includes a termination chosen by the employee in exchange for a severance package in which the employer indicates that after the offer period for the severance package has expired, a certain number of remaining employees will be terminated
  • And a termination chosen by the employee in exchange for a severance package in which the employer indicates that after the offer period for the severance package has expired, a certain number of remaining employees will be terminated. Workplace Safety is a source of concern. Generally, if an employee terminates his or her employment because of widespread concerns about workplace safety, the separation is not seen as an involuntary termination. However, if the employee can establish that the employer’s acts or inactions resulted in a major unfavorable change in the work relationship, the termination would be considered involuntary, comparable to a constructive discharge. The termination of an employee’s employment owing to personal reasons unconnected to the acts or inactions of the employer, such as a health condition of the employee or a family member, shall not be considered an involuntary separation. Unavailability of child care and schooling. A voluntary termination is not considered an involuntary termination if an employee decides to terminate work as a result of COVID-19, because his or her kid is unable to attend school or because daycare is not accessible as a result of COVID-19.

However, while Notice 2021-31 includes examples of what constitutes an involuntary termination, the Notice does not cover all possible scenarios that may arise. When Does an Elected Official Suffer an Involuntary Dismissal from His or Her Position? It is possible that public agencies may be faced with the dilemma of whether a former elected official who loses agency-sponsored health insurance is qualified for the ARPA’s COBRA subsidy. Once again, the answer will be determined by the facts and circumstances of the case.

Event causing coverage loss Description Is the official eligible for the COBRA subsidy as an AEI?
Lost reelection: An elected official who loses a reelection bid in December 2020 Probably yes
Term limits Due to term limits, an elected official cannot run for reelection in December 2020 due to term limits. Probably yes
Resignation An elected official is eligible to run for reelection in December 2020, but decides not to Probably no

Do you have any thoughts on involuntary terminations due to “gross misconduct?” Despite the fact that employees who are involuntarily terminated are eligible for the COBRA subsidy, one exception is that employees who are fired for “severe misbehavior” do not qualify for COBRA continuation coverage (and by extension, are ineligible for the COBRA subsidy). In accordance with the American Rescue Plan Act of 2021, see Notice 2021-31 and the U.S. Department of Labor’sFrequently Asked Questions About COBRA Premium Assistance Under the Act of 2021.) The hard part is that neither COBRA nor the ARPA define “gross misconduct” in any specific way.

  1. Prior to rejecting a former employee COBRA continuing coverage and subsidy after a termination for egregious misbehavior, it is recommended that employers contact with legal advice.
  2. When an individual experiences a decrease in hours, whether voluntarily or involuntary, as a result of which they lose their employer-sponsored health care, they are classified as an AEI.
  3. Furloughs, which are defined as a temporary loss of work or a total decrease in hours with a reasonable expectation of returning to employment, may result in a reduction in hours regardless of whether the employer instigated the furlough.
  4. What about other possible reasons for coverage termination?
  5. Examples include divorce and the loss of health insurance coverage because a dependent kid no longer qualifies as a dependent child (for example, owing to reaching the age of eligibility).
  6. In addition, the death of an employee does not constitute an involuntary termination of his or her employment contract.
  7. Employers that fail to submit the requisite notification will be subject to a $250 IRS penalty for each instance of failing to do so.
  8. Is there any guidance from the Internal Revenue Service on employer tax credits for recovering COBRA subsidies?
  9. During the calendar quarter in which the premium assistance is provided, the credit is used against the employer’s Medicare (HI) tax.

Any excess credit, on the other hand, is refundable, and government employers may ask for an advance payment of employer credits due to COVID-19 using IRS Form 7200, “Advance Payment of Employer Credits Due to COVID-19.” A updated draft of Form 7200, which contains a new section for the COBRA premium assistance tax credit, was recently issued by the Internal Revenue Service.

Employers in the government sector are then allowed to seek for tax credits to offset their costs.

The most current published Form 941 and accompanying instructions were produced in March 2021 and are only to be utilized for the quarter ending March 31, 2021, unless otherwise specified in the instructions.

In order to get guidance on how to report COBRA subsidies and apply for relevant tax credits, government entities will need to wait for future direction from the IRS, as well as the release of Form 941 and instructions for the quarter ending June 30, 2021.

It is not recommended that you act on the information contained in this Special Bulletin without seeking professional guidance. Employers are recommended to explore this with their own legal counsel or certified public accountant.

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