With the flood of federal guidance recently issued and new legislation in the form of the American Rescue Plan Act (ARPA), we have outlined below key dates and obligations to help ensure COBRA Subsidy Compliance. ARPA includes a provision for a COBRA continuation coverage premium subsidy of 100 percent for individuals and families who experienced an involuntary termination of employment or a reduction in hours.
Key dates regarding the COBRA Subsidy
March 11, 2021 – Bill Signed by President
April 1, 2021 – Subsidy effective date
30 days from March 11, 2021 – the DOL to provide model subsidy notification notices
45 days from March 11, 2021 – the DOL to provide model expiration of subsidy notices
Within 60 Days from April 1 – Assistance Eligible Individuals (AEIs) who become eligible for COBRA before April 1, 2021, notified of subsidy
Upon entitlement to elect COBRA – COBRA continuants who become eligible for COBRA on or after April 1, 2021, notified of subsidy
60 days from the date the notice of subsidy is sent – the election period for the second election by the AEI expires
45 days from the expiration of an AEI’s subsidy period – provide model notice of expiration of the subsidy
September 30, 2021 – general subsidy end date (subsidy may end earlier for particular individuals)
Review all employee terminations and reduction in hours back to November of 2019. Confirm which terminations are involuntary and those that experienced a reduction in hours. Report only the involuntary terminations and those that experienced a reduction in hours that created a loss in coverage to your COBRA administrator as soon as possible.
FAQ of the most common questions at this time
Does the ARPA subsidy apply to small employer groups under 20 lives?
Yes, states that enforce a continuation of coverage such as the Arizona MiniCobra Continuation requirements for small employer groups must also comply with the subsidy regulations.
Who pays the premiums for the AEI’s?
All employers are responsible to pay 100% of the premium for the AEI’s subsidy except small employer groups that are fully- insured (the carrier will pay 100% of the subsidy for fully-insured small employer groups).
Does the ARPA subsidy allow a break in coverage?
Yes. The second enrollment period allows Assistance Eligible Individuals (AEI) to elect COBRA coverage from 4/1/2021 to the end of their original last day of COBRA without having to pay current on all premiums due, as long as the AEI is still within the original COBRA continuation period.
Does the look back period include individuals with an SSDE or those in extended COBRA periods in months 19-36?
ARPA does not specifically address this situation. Further regulatory guidance is anticipated.
Does the subsidy apply to dental, vision, EAP, and HRA plans?
At this time the subsidy appears to apply to medical/RX, dental, vision, EAP, and some HRA plans. FSAs are excluded.
Can administrators continue to charge the 2% admin fee?
Yes. The total premium amount is inclusive of any administrative fee. The federal government will reimburse the cost of the subsidy through payroll tax credits. The total premium amount is inclusive of any administrative fee.
2020 was a leap year. Should it be 366 days?
No. The 1 year extension period started after February 29, 2020. Accordingly, the extra day in February 2020 is not included in the 1-year extension period and the calculation of 1 year should be based on 365 days.
If a former employee who involuntarily terminated has enrolled in group coverage with another employer but is deemed an AEI according to our records, is that person eligible to drop their current employer’s coverage and enroll in fully subsidized COBRA coverage through our plan?
No. Eligibility for another group health plan would make the person ineligible for the subsidy.
If a participant was originally eligible for COBRA on September 1, 2020, and receives a second election notice for April 1, 2021, would the participant be responsible for paying premiums from September 1, 2020, through March 31, 2021, or would the participant’s eligibility pick up on April 1, 2021, for the duration of the 18 months, not to go beyond the original 18 months?
The individual would not be responsible for paying premiums for September 1, 2020, through March 31, 2021, unless the individual wished to have coverage during that time. The subsidized coverage would begin April 1, 2021, but would NOT go beyond the original duration of COBRA coverage.
Stay tuned as additional IRS clarification may be forthcoming.