Important COBRA Updates & Employer Requirements under the American Rescue Plan Act (ARPA) of 2021
The American Rescue Plan Act (ARPA) was passed on March 11, 2021 and went into effect April 1, 2021. It includes a provision for a federal COBRA premium subsidy for assistance eligible individuals (AEI’s). The subsidy, which pays 100% of COBRA premiums, is available from April 1, 2021 through September 30, 2021. To help you navigate this, our team has put together an overview of the requirements, the newly published model notices and a helpful FAQ.
Who’s eligible for the COBRA subsidy?
Eligible employees, referred to in the law as Assistance Eligible Individuals (AEIs) are those:
- With COBRA eligibility between November 1, 2019 and September 30, 2021, even if they did not previously elect COBRA or elected COBRA and cancelled before the end of the term; that lost coverage due to:
- an involuntary termination of employment (other than by reason of gross misconduct); or
- a reduction in hours; and
- who enroll in COBRA coverage as of April 1, 2021 or who elect COBRA coverage during the 60-day period following the date they are notified of this premium subsidy and corresponding election who do not have another offer of employer-sponsored coverage or access to Medicare.
Recommended Next Steps (Employer Actions/Responsibility)
As Plan Administrator, employers are responsible for determining your Assistance Eligible Individuals and ensuring the required notices are delivered timely. If you work with a COBRA administrator, you should discuss the process they are using to determine AEI’s and sending the required notices. If you do not work with a COBRA administrator, the guidance below may help determine important next steps and considerations.
Employers who administer COBRA:
- Identify AEI’s: Employers must determine who is considered an Assistance Eligible Individual (AEI).
- Send Notice to AEI’s: Provide Model Notice with Extended Election Period to AEI’s by May 31, 2021. ARPA requires individuals in the lookback period, as well as those currently enrolled, receive a notification regarding the subsidy within 60 days of April 1, 2021; newly eligible COBRA participants should be notified within the current standard COBRA time frames.
- Monitor Elections: Monitor COBRA elections and terminations, and notify carriers of changes in enrollment on a timely basis.
- Apply for Tax Credits: Employers will be able to offset the cost of any COBRA subsidies through a payroll tax credit against the Section 3111(b) Medicare tax. The credit will include the entire COBRA premium, including the 2% administrative fee, which will be billed through the client. Please ensure you are including the total premium, with the 2% administrative fee, for your credit.
- Subsidy Expiration Notice: Provide Notice of Expiration of Premium Assistance between August 16th – September 15th 2021 (or sooner if COBRA is exhausted prior to end of subsidy period)
On April 7th, the Department of Labor (DOL) issued model notices, FAQs, and other materials related to the COBRA premium assistance program that took effect on April 1st. All DOL materials are available on a dedicated website.
The four model notices provided are:
- Model ARP General Notice and COBRA Continuation Coverage Election Notice. This must be used for qualifying events that occur during the COBRA subsidy period (April 1, 2021 to Sept. 30 2021). This notice may be provided separately or with the COBRA election notice following a COBRA qualifying event.
- Model Notice in Connection with Extended Election Period. This must be sent no later than May 31, 2021 to all AEI’s who had a qualifying event between October 1, 2019 and April 1, 2021. This Notice does not need to be sent to individuals whose maximum COBRA continuation coverage period, if COBRA had been elected or not discontinued, would have been exhausted before April 1, 2021.
- Model Notice of Expiration of Premium Assistance. This must be sent between August 16 - September 15, 2021 to AEI’s whose COBRA subsidy will expire on September 30th. If an AEI’s subsidy expires earlier due to their eligibility under COBRA exhausting they should receive the notice prior to the expiration.
- Model Alternative Notice. This must be sent to AEI’s of employers who are not subject to federal COBRA but instead are subject to state continuation requirements. Examples include small employers and some church plans.
We understand that these time-sensitive requirements are new and complex. We've compiled frequently asked questions for you to download below, with additional information to help guide you.