COBRA Archives - ARC Benefit Solutions

Attention Employers: The Important ARPA Compliance Tools You Need

May 7, 2021/in American Rescue Plan Act, ARC Updates, COBRA, Compliance, Employee Benefits, Legislation/by ARC Benefit Solutions

INFOGRAPHIC: Before you read, check out this infographic to find out what you need to do for your business.

If you are subject to COBRA... If you are not subject to COBRA (fewer than 20 employees)...

If you are subject to COBRA…

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.

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

The American Rescue Plan Act and its effect on COBRA premiums

ATTENTION EMPLOYERS: What You Need to Know About the American Rescue Plan Act

March 12, 2021/in ARC Updates, COBRA, Employee Benefits, Legislation/by ARC Benefit Solutions

Attention employers: If you are subject to COBRA law, please read this important alert.

Yesterday, President Biden signed into law the American Rescue Plan Act (ARPA). This bill contains provisions on exchange subsidies, dependent care flexible spending accounts, unemployment and economic stimulus, and PPP loans/aid to businesses. Also, this bill requires additional administration from employers with respect to COBRA.

Under this bill, eligible COBRA enrollees (and their families) can receive a 100 percent federal subsidy for their COBRA premiums. This federal government subsidy will be granted through payroll tax credits for employers. The employer will pay 100 percent of the former employee’s COBRA premium during the time period and will be reimbursed by the federal government through a credit against payroll taxes or, for credit amounts exceeding payroll taxes, as a refund of an overpayment.

The subsidy for COBRA premiums will begin on April 1, 2021, and end on September 30, 2021. Eligibility for the subsidy requires involuntary termination of employment or a reduction in hours only. Employees who terminate voluntarily from employment are not eligible.

The subsidy will last for a maximum of six months. Subsidies will end the earlier of 1) the individual’s maximum period of COBRA coverage (normally 18 months) or 2) September 1, 2021. If the individual receiving the subsidy becomes eligible for coverage under another employer’s group health plan or under Medicare, the subsidy will also end early.

Individuals on COBRA are required to notify their former employers if they become eligible for such coverage, however under ARPA, individuals will be subject to a $250 penalty if they fail to notify their former employer of their new opportunity for coverage. If the failure is deemed to be with intent, the penalty is the greater of $250 or 110 percent of the subsidy.

Employers are permitted (not required) to allow employees to choose a different group health plan than their current selection but the premium cannot be higher than the employee’s former plan. If the employer chooses to allow this change, the employee would have 90 days from the date of their COBRA notice to make a new plan selection.

Employers have responsibilities. They must provide a revised COBRA notice to all who may be eligible for the subsidy. This requires employers to amend their current COBRA notices and election forms. We expect new model notices to be issued within approximately 30 days. Employers must also provide notices to eligible workers who have yet to elect COBRA by April 1, 2021, and those who elected COBRA but then discontinued it. Those previous employees may elect COBRA during the deemed enrollment period of April 1 ending 60 days from the date notice of the subsidy was provided.

Employers should discuss these changes and responsibilities with their agent and/or their COBRA administrator or third-party administrator immediately in order to prepare. A list of potentially eligible employees should be compiled so that notices can be sent as they are developed. The list should include all COBRA eligible former employees who were eligible for the last 18 months, those who have termed from the plan back to November of 2019 since their 18 months of coverage would have run through April of 2021.

We ask that you reach out to your ARC representative for more detailed information as the administration continues to develop. We will stay ahead of all the latest news and information to ensure you are in the loop.

Once COBRA, Always COBRA?

January 29, 2021/in COBRA, Compliance, Employee Benefits/by ARC Benefit Solutions

Once it is established a company has to offer COBRA, does it always have to offer COBRA thereafter?

Not necessarily. Let’s take a look.

The basics

Many say credit for the origin of COBRA should be given to a grassroots organization, The Older Women’s League (OWL). This group was searching for a way to help women continue their health coverage after experiencing a divorce or the death of their spouse. Their concerns were developed through legislative efforts and eventually became a key feature in the Consolidated Omnibus Budget Reconciliation Act (COBRA), which was a federal law passed in 1985 and signed by President Ronald Regan. In general, COBRA provides for continuing group health insurance coverage for some employees and their families after a job loss or other qualifying events like divorce or death. Well done, ladies!

Which employers must offer COBRA?

In general, COBRA applies to all private-sector group health plans maintained by employers that have at least 20 employees. In other words, COBRA applies if you have 20 or more employees on more than 50 percent of its typical business days in the previous calendar year.

Let’s dive a little deeper into these two core conditions.

First, if we are counting employees, that begs the question, “who is considered an employee for the COBRA assessment?” Both full-time and part-time employees are counted to determine whether a plan is subject to COBRA. The best starting point is to figure out your total number of employees.

If you have some part-time employees, more calculations may be necessary because part-time employees are not given the same full numeric value as full-time employees (each part-time employee counts as a fraction of a full-time employee). The best recommendation is to contact your benefits advisor at ARC and work through the calculations together.

Secondly, like most companies, the employee count changes throughout the year. So what period of time are we using to establish the employee count? The authors of COBRA understood a company’s current or future employee roster is subject to change. As a result of this insight, the COBRA assessment uses a snapshot from the previous calendar year (January through December). The rationale is that last year’s employee count is a “known” number and not subject to change.

In addition, the COBRA assessment allows for an average of the previous calendar year to even out any fluctuations. If you have any questions on how to assemble your snapshot, please contact your ARC benefits advisor. We have a great tip on how to use the data you are already filing with a government agency.

Admittedly, COBRA gives us some practical guidelines on who to count, how to count, and when to count employees. Sharing this information is vitally important in knowing how to administer your plan.

Does COBRA apply to your group plan?

If you have not recently done an assessment for COBRA, the beginning of the year is a perfect time to review. If you have been with the same insurance carrier for several years, do you know if that carrier has your COBRA status registered correctly in their system?

A critical factor here is to not overlook the fact that employee counts for COBRA are based on the previous calendar year.

With the coronavirus challenges in 2020, many companies averaged a different employee count from previously consistent normal years.

Did you average fewer than 20 employees in 2020? Did you have several employees change from full-time to part-time? If so, this will impact your COBRA employee count calculation.

If you averaged fewer than 20 employees in 2020, you may not be obligated for COBRA in 2021. Please note, the COBRA obligation may not apply to the current year, however if you are an active COBRA continuant (someone has previously elected and continues to have COBRA coverage), their COBRA coverage remains in force unless otherwise terminated for permitted reasons.

You may not be completely off the hook from offering the option to continue group health insurance coverage to covered employees and their families after experiencing a qualifying event. Many states have passed comparable provisions, or mini-COBRA laws, for smaller employers (less than 20 employees). As an ARC client, you have access to licensed representatives who are available to help you sort through these kinds of requirements. Contact us today.

How COVID -19 Has Impacted COBRA Coverage

July 29, 2020/in COBRA, Compliance, Employee Benefits, Legislation/by ARC Benefit Solutions

COVID-19 has had a dramatic impact on the benefit provision surrounding COBRA. On April 28, 2020, new guidance was enacted for employers, insurers, and benefit plan vendors by the Department of Labor (DOL) and the Internal Revenue Service (IRS), aimed at mitigating the disruptive effect of COVID-19. The DOL and IRS issued a joint rule providing an extension of certain participant deadlines to enroll in health coverage, as it relates to electing and paying for COBRA coverage and making and appealing benefit plan claims. The new rules do not need to be explained to the participants, but it is recommended that the employer provide a notice of the new extended deadlines.

The joint rule provides that an “outbreak period” is ignored in determining the deadline for participants to:

Elect Special enrollment in a health plan
Elect or pay for COBRA coverage

The outbreak period is the period starting from March 1, 2020, until 60 days after the announced end of the COVID-19 National Emergency (at the time this post has been published, the end of the National Emergency has not yet been announced or indicated).

In an effort to explain the impact of the outbreak period, the following example will imagine the end of the COVID-19 National Emergency to be November 30, 2020. Thus, the outbreak period would end on January 29, 2021. This date does not reflect the actual end of the National Emergency, but will, instead, be used in our examples.

COBRA Elections

Generally, COBRA continuation coverage must be elected by the qualified beneficiary within 60 days of the date the plan administrator or COBRA vendor gives notice. However, the joint notice provides that the outbreak period is ignored in the determining the deadline.

An election period that begins or ends in the outbreak period will be extended, allowing the qualified beneficiary additional time to elect COBRA. If the qualifying event occurs during the outbreak period, the deadline will be 60 days after the end of the outbreak period.

Example: Using the imagined outbreak period dates above, if a qualified participant is eligible for COBRA on April 1, 2020, they will have until January 29, 2021, to elect COBRA.

COBRA Premiums

Plans cannot require payment of the initial COBRA premium earlier than 45 days after COBRA has been elected. After the initial 45-day premium period, there is a 30-day grace period for payment of the COBRA premium each month. The joint notice provides that the outbreak period is ignored in the determining the deadline for payment of COBRA premiums, which allows a participant a great deal of additional time to pay.

Example: If an employee was terminated on January 1, 2020, has elected COBRA, and the monthly premium is due the first day of each month, then premiums due beginning February 1, 2020, and during the outbreak period have an extended due date.

Premiums due February 1, 2020, would have a 30-day grace period until March 1, 2020, and ignoring the outbreak period assumed to end January 29, 2021, the February premium would be due January 30, 2021. Premiums for March 1, 2020 through January 1, 2021, would be due by March 2, 2021.

Please note that plans and insurers are not required to pay claims during a period for which COBRA premiums have not been paid, but must advise providers that the individual is covered subject to payment of premiums and claims, which have been suspended, then must be paid once premiums have been paid. This requires that the employer monitor the situation and inform insurers that the participant is covered pending premium payments.

Employee Notice of Qualifying Event or of Disability.

COBRA continuants must notify the plan administrator of a qualifying event within 60 days of the event. A qualified beneficiary who becomes disabled may qualify for an extension and must give notice within 60 days of the date of disability.

In both these situations, the deadlines are, again, based on the outbreak period ignored in the same manner as it is for the election and payments deadlines reviewed previously.

Please note that the joint rule does not apply the outbreak period to the date election notices needed to be provided to a qualified beneficiary. We strongly recommend that all employer and plan administrators adhere to the current requirements of the combined period of 44 days to provide a qualified beneficiary with a notice of a COBRA election following a qualifying event.

The DOL issued new model COBRA forms on May 1, 2020, which included an updated version of the model general notice and the model election notice.

Your ARC representatives are prepared with the most updated knowledge and resources surrounding how the COVID-19 pandemic is affecting your business. Contact us today with any questions or concerns.