Who Is Eligible For Cobra Subsidy 2021? (TOP 5 Tips)

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

  • Assistance eligible individuals include any employee (and covered spouse and dependent children) whose involuntary termination of employment occurs during the subsidy period, or who has already elected and is paying for COBRA as of April 1, 2021. An assistance eligible individual also includes an individual whose maximum period of coverage has not expired and (a) did not elect COBRA when it was first offered, or (b) elected COBRA but dropped it.

Who qualifies for the Cobra subsidy?

The COBRA subsidy is available to any individual who (1) had a COBRA qualifying event because of a covered employee’s reduction in hours or involuntary termination of employment and (2) is eligible for COBRA during the Subsidy Period.

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 do I claim my COBRA subsidy credit?

Request an Advance from the IRS: Employers can use Form 7200, Advance Payment of Employer Credits Due to COVID-19, to request an advance of the Credit. However, Form 7200 can only be submitted if the anticipated COBRA Premium subsidy is greater than the employer’s Federal employment tax liability.

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.

Who is not eligible for the COBRA subsidy?

While employees are eligible for the COBRA subsidy when they are involuntarily terminated, one exception is that employees who are terminated for “gross misconduct” do not qualify for COBRA continuation coverage (and by extension, are ineligible for the COBRA subsidy).

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.

Can I get reimbursed for COBRA?

The premium will be reimbursed directly to the employer, plan administrator, or insurance company through a COBRA premium assistance credit.

How does employer get reimbursed for COBRA subsidy?

Employers claim the tax credit by reporting the credit on its federal quarterly employment tax returns (usually Form 941). If an employer’s anticipated quarterly tax credit exceeds their quarterly Medicare tax obligations, then they can use Form 7200 to request an advance of the tax credit (see discussion below).

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.

Are COBRA payments tax deductible 2021?

Premiums for company health insurance are not tax deductible. COBRA insurance is a health plan that allows you to continue employer-sponsored insurance coverage even if you no longer work for that company. Premiums for COBRA insurance are tax deductible, as they are paid entirely by you on an after-tax basis.

Is the COBRA subsidy taxable?

Is the COBRA premium subsidy taxable income for the individual? (updated February 26, 2009) The premium subsidy is not included in the individual’s income. However, there is a phase-out of eligibility for the subsidy, which will increase some high-income individuals’ tax liability if they receive the subsidy.

What is a COBRA premium subsidy?

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.

Can Congress extend COBRA subsidy?

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.

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.

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.

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.

  • Reduced working hours or involuntary termination of employment are also possible outcomes.

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.

How to Apply the IRS’s COBRA Premium Subsidy Guidance

WHO MIGHT BE ELIGIBLE? The term “AEI” refers to anybody who becomes eligible for COBRA benefits between April 1, 2021 and September 30, 2021 as a result of a decrease in hours or an involuntary termination of employment (explained below). While an AEI is qualified for other group health plan coverage, including Medicare, the subsidy is accessible until that time. The same individual may become an AEI more than once (for example, due to consecutive losses of coverage under his or her own or their spouse’s health insurance plan).

Was there a reduction in working hours or an involuntary termination of employment?

(A window program might include, for example, a voluntary severance program, in which an employee who is about to be terminated can chose to cease his or her employment within a specified amount of time, if he or she so chooses.) So long as the objective is to maintain the employment connection, a work stoppage caused by a strike or lockout is also regarded a decrease in hours.

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Employees who are terminated from their jobs because their employer exercised unilateral authority over them while they were willing and able to continue working are considered to have been terminated involuntarily under the Anti-Retaliation Act of 1977 and the Internal Revenue Code of 1986, as amended.

  • The involuntary termination of a job owing to retirement, health-related concerns about workplace safety, a shortage of childcare, or death is not considered to be an involuntary termination in most circumstances.
  • A choice by an employer not to extend an employee’s contract, as well as an employee’s decision to engage in a “window program” as part of a severance package, are both considered involuntary actions.
  • This exemption to COBRA eligibility has been the subject of much litigation.
  • WHAT TYPE OF COVERAGE DOES THE COMPANY NEED TO PROVIDE?
  • The subsidy covers coverage under a vision-only or dental-only plan, as well as coverage through a health reimbursement account (HRA) (unless the HRA is connected with Medicare).

Plan sponsors may permit AEIs to enroll in coverage that differs from the coverage that the individual was enrolled in at the time of the qualifying event, but the premium for the different coverage cannot be greater than the premium for the coverage that the AEI was enrolled in at the time of the qualification event.

  • Insurance with a premium that is higher than the premium of the coverage that was in effect at the time of the qualifying occurrence is ineligible for coverage under this provision.
  • HOW DO I KNOW WHEN THE AEI’S COBRA PREMIUM ASSISTANCE PERIOD WILL BEGIN?
  • It is possible to get COBRA premium assistance for coverage periods spanning from April 1, 2021, through September 30, 2021 if the decision to opt COBRA continuing coverage is made later than September 30, 2020 but before the expiration of the corresponding 60-day election period.
  • WHEN DOES THE SUBSIDY COME TO A CLOSE?
  • The death of an AEI does not preclude the qualifying beneficiary spouse and dependent children of the dead AEI from being eligible for COBRA premium assistance after his or her death.

IN WHAT CIRCUMSTANCES DOES AEIS NEESSARYLY ELECT COBRA? The Notice emphasizes that the following people are eligible for an extended election period to elect COBRA continuation coverage under the Affordable Care Act:

  • If the qualifying event happened before April 1, 2021, and the individual has not yet elected COBRA continuing coverage, the individual may be subject to an AEI (including for an individual who has an open COBRA election period as of April 1, 2021). This group of individuals may elect retroactive COBRA continuation coverage under the original COBRA election period that was available prior to the ARPA extended election period
  • However, COBRA premium assistance does not apply to periods of coverage that occurred prior to the first period of coverage that began on or after April 1, 2021.
  • If an employee’s qualified beneficiary (spouse or dependent child) does not elect COBRA continuation coverage by April 1, 2021, but would have been an AEI if the election had been in effect, even if the employee previously elected self-only COBRA continuation coverage, the employee will be considered an AEI.
  • A qualified beneficiary who experienced a qualifying event that resulted in a reduction in hours or an involuntary termination must be offered the extended election period with respect to any health coverage the qualified beneficiary was enrolled in prior to the qualifying event for which the individual does not have a COBRA election in effect on April 1, 2021, even if the qualified beneficiary previously elected COBRA continuation coverage with respect to other coverage in which the qualified beneficiary was enrolled.

A qualified beneficiary who experienced a qualifying event that resulted in a reduction in hours or an involuntary termination must be offered the extended election period with respect to any health coverage the qualified beneficiary was enrolled in prior to the qualifying event and for which the individual does not have a COBRA election in effect on April 1, 2021, even if the qualified beneficiary previously elected COBRA continuation coverage with respect to other coverage in which the qualified beneficiary was enrolled.

COBRA Subsidy Remaining Action Item for Employers

On September 29, 2021, a post was made. InCOVID-19,InCOBRA 9 minutes are required for reading. The COBRAsubsidy has been one of the most visible components of the American Rescue Plan Act of 2021 (ARPA), as well as one of the most significant in terms of impact on businesses. Having said that, the qualifying term for assistance-eligible persons will expire on September 30, 2021, unless an extension is granted. Many plan sponsors are still working on one more action item. Continue reading to learn how you can maintain compliance.

What is the COBRA Subsidy?

In March 2021, the passage of ARPA resulted in the federal government subsidizing the whole cost of COBRA coverage through the end of September 2021. The majority of those who were working had a portion of their insurance premiums paid for by their employer. Employees who had been let off or whose hours had been reduced, as many millions of Americans did during the epidemic, were given the opportunity to keep their health insurance under the COBRA program. This would result in the health insurance premium being fully covered by COBRA.

In many cases, temporary insurance is more difficult to obtain, especially when one is seeking for job.

As a result, COBRA has evolved into a necessary subsidy that is intended to provide critical help to workers who are experiencing financial difficulties or who are looking for job.

COBRA Subsidy 2021 Eligibility

In the event that an employee voluntarily terminated their health insurance benefits after November 1, 2019, they were eligible for discounted COBRA coverage until September 30, 2021. There were three types of persons who were to be deemed eligible for consideration:

  1. If an employee’s health insurance benefits were terminated involuntarily on or after November 1, 2019, they were eligible for discounted COBRA coverage until September 30, 2021. It was decided that three types of persons would qualify for the award:

Employees who were previously qualified for the subsidy will lose their eligibility if they do any of the following:

  1. In order to be eligible for health insurance under a new plan, you must: Reach the date on which their COBRA coverage would normally terminate, for example, if their 18-month period expires in July

The fact that the subsidy was solely intended to cover the cost of health insurance premiums should be made clear to both employers and employees. According to an article in Forbes, the plan did not cover copays, deductibles, or co-insurance payments. According to The National Law Review, the Act “provides assistance qualifying persons with free COBRA coverage for the duration of the subsidy period,” and the subsidy itself is not taxable for those who qualify.

Involuntary Termination Clarifications for COBRA Subsidy

In May of 2021, the Internal Revenue Service (IRS) released a notification referred to as Notice 2021-3 in order to address ambiguities surrounding employee eligibility. If employees did not exhaust their maximum COBRA coverage prior to April 1, 2021, then employers were obligated to offer any COBRA subsidies to any qualified employees who may have been involuntarily terminated or who may have experienced any type of decrease in hours prior to April 1, 2021.

Employees also utilized those frequently asked questions to figure out what the word “involuntary termination” meant. According to the legal firm Seyfarth Shaw LLP, they were the following:

  • Termination on one’s own initiative for a legitimate cause It was found that “in this case, the termination was attributable to an action by the employer that resulted in a major negative change in the employment relationship, akin to a constructive discharge.” termination when the employee is out from work due to illness or disability, but only if it is anticipated that the employee will return to work following the illness or disability
  • Assuming that the employee elected to retire rather than be dismissed (and that the employee was informed of the impending involuntary termination)
  • Resignation as a result of a significant shift in the geographic location of the employer
  • If an employee was ready and able to renew his or her work contract, the employment contract was not renewed

For further information on those clarifications, please refer to questions 24 through 34 in the Notice (which may be found at the URL mentioned above).

Additional COBRA Subsidy Clarifications

InNotice 2021-3, it is stated that A number of additional issues about the COBRA subsidy were addressed by the Internal Revenue Service, including the following:

  1. Notice 2021-3 was published in the Federal Register on February 13, 2012. A number of other issues about the COBRA subsidy were addressed by the IRS as well, including the following:

How Does the COBRA Subsidy Work?

According to attorneys from Polsinelli PC who wrote in The National Law Review, if a current or former employee qualified for COBRA coverage for which the subsidy paid, the employer would be required to reimburse the subsidy payment to the current or former employee within 60 days of the subsidy payment being made. If employers had followed the notification requirements, they would have been eligible for reimbursement from the federal government. The refund came in the form of a payroll tax credit, which they were able to claim by completing Form 941 with the IRS for their quarterly taxes.

  1. In most cases, an employee becomes eligible for COBRA as a result of being terminated or having their hours reduced
  2. The following is how the employer notifies all eligible employees about the COBRA subsidy: Employees were required to do this within 60 days of a qualifying occurrence occurring on or after April 1, 2021, starting on or after April 1, 2021
  3. The employee chooses COBRA benefits, which are as follows: This was to take place within 63 days of being eligible for the program. The Carrier is compensated by the Employer: There was enough money left over to meet the expense of the healthcare premium. Employers are reimbursed by the government in the following ways: This refund was received in the form of a payroll tax credit, but only after the organization filed Form 941 with the IRS with respect to its quarterly taxes.

2021 COBRA Subsidy Employee Notice Requirement

Employers were required to comply with employee notification rules regarding the subsidies in order to qualify for the employer credit. The notices largely contained the standard COBRA information as well as any unique restrictions set forth in the ARPA. They then have to be given to qualified potential participants within 60 days of their qualifying event taking place. It was necessary for plan sponsors to notify assistance eligible persons no fewer than 15 days and no more than 45 days before the subsidy expired.

The following were among the notices:

  1. Any paperwork that may be required in order to prove eligibility for premium assistance
  2. All information necessary to contact the plan administrator, such as name, address, and phone number, as well as the names and phone numbers of individuals who may be able to provide pertinent information about the premium subsidies
  3. The extraordinary 60-day election term will be described in detail. The qualified beneficiaries’ responsibility to notify the plan administrator whenever the qualified beneficiary becomes eligible for disqualifying coverage is described in detail. Description, displayed prominently, of an eligible beneficiary’s right to a subsidized premium as well as any limitations imposed on the qualified beneficiary’s right to receive the discounted premium Description of the qualifying beneficiary’s choice to enroll in an alternative kind of coverage, if such option is granted by the employer.
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Any paperwork that may be required in order to determine eligibility for premium assistance; and All information necessary to contact the plan administrator, such as name, address, and phone number, as well as the names and phone numbers of individuals who may be able to provide pertinent information about the premium subsidy; and The unusual 60-day election term will be described in detail; and A summary of the qualified beneficiaries’ responsibility to notify the plan administrator whenever the qualified beneficiary becomes eligible for disqualifying coverage; and A description of an eligible beneficiary’s right to a subsidized premium, as well as any constraints that may apply to that right to a subsidized premium, that is prominently displayed.

Description of the qualifying beneficiary’s choice to enroll in an alternative kind of coverage, if such option is allowed by the employer;

Who Can Help Employers with the COBRA Subsidy?

It would have been beneficial for employers who administered COBRA on their own, or with the aid of a third-party administrator, to keep an eye out for changes in the Department of Labor’s rules and regulations. In this scenario, it would be beneficial to obtain advice from a registered benefits broker as well as from an attorney. Alpine is BerniePortal’s exclusive COBRA third-party administrator (TPA). Alpine’s staff has engaged closely with all of its employer and broker clients to ensure that all past, current, and prospective COBRA members who are eligible for the subsidy are made aware of their options and how to take maximum use of the subsidy, according to Alpine.

You may learn more about COBRA changes by viewing the Alpine webinar presentation, which is available below. Keep in mind that the coverage term for this subsidy began on April 1, 2021, and will conclude on September 30, 2021, so keep that in mind while planning for the future.

Will The COBRA Subsidy be Extended?

From September 30, 2020 to September 30, 2021, the COBRA subsidy will be available. At the moment, this is the last day to apply for subsidized help. There has been no news on whether or not the deadline would be extended beyond this point. The Department of Labor (DOL) has also provided further explanations regarding the COBRA subsidies through the publication of a frequently asked questions (FAQs) section. To understand more about the specific laws and regulations that may apply to your team, please read the ten-page booklet linked below.

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.

Finally, employers must submit notification of the expiration of an AEI’s subsidy to the AEI 15–45 days before the subsidy expires, depending on when the subsidy was granted. 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.
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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.

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).

  1. The following are responses to some of the most often requested and most fascinating inquiries we’ve received.
  2. 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.
  3. Yes.
  4. This covers time off for medical or disability-related reasons, as well as time off for personal reasons.
  5. The employee moved on to another organization, however his job with that company was recently terminated due to poor performance on his part.
  6. It’s possible to have both.
  7. The individual will be given the option of continuing their COBRA coverage.

The ARPA mandates that subsidized COBRA coverage be made available to all persons, even those who have terminated or never elected COBRA coverage.

What happens to those employees that the corporation knows are qualified for Medicare or another employer’s health insurance plan?

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.

  • Question7 An employee of a corporation was just sacked for being dishonest.
  • If so, what is the definition of gross misconduct?
  • 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.
  • In order for wrongdoing to be termed “gross,” it would most likely need to go above and beyond simple carelessness.
  • Instead, there must be something outrageous about the employee’s misconduct—something willful or reckless—in order for it to be considered outrageous.
  • 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.
  • Smithey is a co-chair of the employee benefits and executive pay practice group.
  • In the Chicago branch of the business, Timothy J.
  • 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.
  • Employers subject to COBRA regulations are expected to inform their group health plan administrator within 30 days after an employee’s employment ends or their job hours are decreased.

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.

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.”

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