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This article is specifically for groups that are required to comply with COBRA. In general, this applies to groups of 20 or more total full-time equivalent employees. If you’re not sure if you are subject to COBRA, please feel free to contact your ARC representative.
Since the American Rescue Plan Act was signed into law on March 11, 2021, the impacts on COBRA were not fully understood until recent guidance was released. We will review the eligibility, the model notices (which are now available), and update the timeline for notification and premium assistance as it relates to COBRA.
As previously stated in the initial review of ARPA, Assistance Eligible Individuals (AEI) will receive 100 percent subsidy for their COBRA premiums under two circumstances:
- Employee was involuntarily terminated. (Doesn’t apply to employees terminated due to gross misconduct.)
- Employee’s hours were reduced by an amount triggering the employee’s loss of eligibility for benefits.
This applies to employees, spouses, and dependents with a qualifying event between November 1, 2019 to present because they are still within their 18-month period of coverage. Individuals who previously declined COBRA are eligible as long as their 18-month coverage period has not expired. In addition, individuals who elected and are currently on COBRA or who elected and later dropped COBRA are eligible as long as their 18-month coverage period has not expired. The AEI ceases to be eligible for the premium subsidy if they become eligible for other group health coverage through a new employer, a spouse’s plan, or with Medicare.
Employers are required to notify AEIs of their rights under ARPA by May 31, 2021. The new model notice for those currently on COBRA and AEI’s who are eligible is available on the DOL.gov site. However, if you have a COBRA Administrator, they may have already reached out to you and/or handled this on your behalf. If your COBRA is administered by an insurer, see the RESOURCES section for a grid by carrier and plan type that explains what each insurer is doing to help employers comply, and who ultimately files and receives the tax credit.
It’s important that employers begin immediately identifying their list of eligible terminated employees to assist the carrier/vendor, if applicable, with the notification requirement or so that the employer can send the model notice in a timely fashion if applicable. Individuals have 60 days to elect this coverage from the date of receipt of the notice. Due to the timing of the model notice and the notification period, it is expected that any eligible individual currently on COBRA will continue to make payments for the months of April and May.
The subsidies will be paid at 100 percent for the AEI from April 1, 2021 to September 30, 2021. There is also a requirement for employers (plan) and issuers (carriers) to notify those individuals who elect and are awarded the subsidy when the premium subsidization is due to expire. This notice (which is not yet available) is due between 15 to 45 days prior to the expiration of the subsidy and the AEI would then be eligible for a Special Enrollment Period to enroll in coverage through the marketplace.
Generally speaking, whichever entity is responsible for paying the COBRA premium subsidy for the AEI, carrier or employer, will also be the party who files and receives the tax credit. The credit is meant to be taken against the Medicare tax on the employer’s payroll taxes.
The resources included below will provide available information to date. If you have any questions about the requirements or available notices, please give your ARC Client Advisor a call. We recommend that you seek specific advice on filing for the premium tax credit with your accounting professional.
Resources
ARPA COBRA Guide by Carrier and Plan Type
ARPA Infographic
If you are not subject to COBRA (fewer than 20 employees)…
This article is specifically for groups that do NOT yet need to comply with COBRA and who are subject to State Continuation of Coverage. In general, this applies to groups of less than 20 total full-time equivalent employees. Michigan and Indiana, for example, do not have state continuation. If you’re not sure, please feel free to contact your ARC representative.
Since the American Rescue Plan Act was signed into law on March 11, 2021, the impacts on COBRA and State Continuation were not fully understood until recent guidance was released. We will review the eligibility, the model notices (which are now available), and update the timeline for notification and premium assistance as it relates to state continuation. If your state doesn’t have continuation of coverage rules (aka “mini-COBRA”), you do not need to do anything further.
If the employer’s plan is self-funded or level-funded, state continuation of coverage rules do not apply. This has been validated by many of the carriers with whom we work.
States have yet to weigh in on ARPA regulations affecting state continuation, however the notification and subsidization requirements still exist. In the Resources section below, you will find a detailed guide by carrier and plan type outlining who is responsible for the notification, with and without a vendor, and who ultimately files and receives the tax credit.
In addition, our legal counsel agrees with several insurers who have stated their belief is that state continuation under ARPA only applies these subsidies to the applicable employees, spouses, or dependents who lose coverage due to involuntary layoff or termination during the time period of April 1, 2021 through September 30, 2021, or who are actively covered under state continuation now. It is their contention, in absence of any state or federal guidance on the subject, that the subsidy is for any existing and newly eligible individuals. This is different than the way the rules are being applied for COBRA which is permitting individuals a new enrollment opportunity.
Under ARPA, Assistance Eligible Individuals (AEI) will receive 100 percent subsidy for their COBRA and State Continuation premiums under two circumstances:
- Employee was involuntarily terminated. (Doesn’t apply to employees terminated due to gross misconduct.)
- Employee’s hours were reduced by an amount triggering the employee’s loss of eligibility for benefits.
The subsidy notice requirements only apply to affected employees, spouses, and dependents from April 1, 2021 through September 30, 2021. In addition, the AEI ceases to be eligible for the premium subsidy if they become eligible for other group health coverage through a new employer, a spouse’s plan, or with Medicare.
There is model notice for AEI’s who are eligible which must be sent to all AEI’s by May 30, 2021. The notice required to be sent in the case of State Continuation is called the Alternative Model Notice and is located in the Resources section at the end of this article. It must be sent with the “Summary of the COBRA Premium Assistance Provisions under the ARP Act of 2021.”
It’s important that employers begin immediately identifying their list of eligible terminated employees so that the employer can send the model notice. Individuals have 60 days to elect this coverage from the date of receipt of the notice. Due to the timing of the model notice and the notification period, it is expected that any eligible individual currently on state continuation will continue to make payments for the months of April and May.
The subsidies will be paid at 100 percent for the AEI from April 1, 2021 to September 30, 2021. There is also a requirement for employers (plan) and issuers (carriers) to notify those individuals who elect and are awarded the subsidy when the premium subsidization is due to expire. This notice is not yet available but is due between 15 to 45 days prior to the expiration of the subsidy and the AEI would then be eligible for a Special Enrollment Period to enroll in coverage through the marketplace.
Generally speaking, whichever entity is responsible for paying the state continuation premium subsidy for the AEI, carrier or employer, will also be the party who files and receives the tax credit. The credit is intended to reduce the Medicare tax paid by the employer to pay for the subsidy.
The resources included below will provide available information to date. If you have any questions about the requirements or available notices, please give your ARC Client Advisor a call. We recommend that you seek specific advice on filing for the premium tax credit with your accounting professional.
Resources
ARPA Infographic
ARPA COBRA Guide by Carrier and Plan Type
Ohio State Continuation Overview
State Continuation Model ARPA Notice
Summary of COBRA Premium Assistance Provisions under ARPA 2021