By Mary Ellen Schill
April 7, 2021
Today the Employee Benefits Security Administration (EBSA), the section of the Department of Labor that handles all things employee benefit plans, posted a dedicated webpage with much anticipated (and much needed) employer tools on the “COBRA subsidy” provision of the American Rescue Plan Act of 2021 (“ARPA”), which was enacted on March 11, 2021. The new webpage provides FAQs for both workers and employers, model general COBRA notices (for new qualified beneficiaries) and model extended election period notices (for those who became qualified beneficiaries before April 1, 2021 but are still in their extended election period), model premium assistance expiration notice, and a summary of the COBRA subsidy along with a form for individuals to apply to be treated as an “assistance eligible individual” entitled to a subsidy.
Who Must Comply?
All employers who sponsor group health plans are required to offer the subsidy and provide notices to that effect, even those not subject to federal COBRA. This means that smaller employers with group health plans not currently subject to COBRA will need to rely heavily on the DOL’s model notices and forms (as they don’t currently have such notices).
Who is Entitled to the Subsidy?
ARPA provides for a 100% subsidy of the full COBRA premium for certain “assistance eligible individuals” for periods of COBRA continuation coverage from April 1, 2021 through September 30, 2021. An “assistance eligible individual” is any person who had a COBRA qualifying event that is a result of a covered employee’s reduction in hours or an involuntary termination of employment (except for gross misconduct), and that qualifying event is either on or after April 1, 2021, or, if it occurred prior to that date, the individual would still be in their original 18-month COBRA continuation coverage period had COBRA been elected at the time of the qualifying event. An individual is not an assistance eligible individual if he/she is eligible for Medicare or is eligible for coverage under any other group health plan. The subsidy (referred to as premium assistance) is 100% of the COBRA premium (plus the 2% administrative fee if one is charged).
We Didn’t Have Any Employees Who Lost Their Jobs Due to COVID-19, Do We Need to Worry About This?
While the ARPA COBRA premium assistance was part of a series of COVID-19 relief laws, it is not a requirement that the individual’s qualifying event was a result of COVID-19. Any covered employee who became/becomes eligible for COBRA due to a reduction in hours (apparently voluntary or involuntary) or termination of employment (involuntary only) can be an assistance eligible individual, even if the qualifying event had nothing to do with COVID-19.
We Don’t Have Anyone on COBRA Right Now, Do We Just Update Our Notices Going Forward?
ARPA allows assistance eligible individuals to, in effect, hop back on your coverage for the period of April 1, 2021 through September 30, 2021, and take advantage of the subsidy. So long as their original 18 month continuation coverage period hasn’t expired and they aren’t eligible for other group health plan coverage or Medicare, they have 60 days after receipt of the employer’s notice of the subsidy (discussed below) to elect COBRA continuation coverage. Coverage must be effective April 1, 2021 and will last until the expiration of the earlier of the original 18 months of coverage, entitlement to Medicare or other group health coverage, or September 30, 2021. Those who return to your group health plan coverage will start over with deductibles, copays, and out-of-pocket limits.
What About COBRA Qualified Beneficiaries That Are Currently on COBRA?
If those qualified beneficiaries are “assistance eligible individuals” you must provide that coverage on a fully subsidized basis (i.e. no charge) during the period April 1, 2021 through September 30, 2021. If a COBRA premium has already been paid for April, you must refund that premium.
If We Can’t Charge a COBRA Premium, Who is Paying for the Coverage?
The federal government is reimbursing employers, multiemployer welfare health plans, and insurance carriers for the premium assistance. For employers that are subject to COBRA, or for smaller employers not subject to COBRA but with self-funded health plans, the employer will get the reimbursement (after paying the premium to the insurance carrier if the plan is insured). If coverage is provided under a multiemployer welfare health plan, the plan gets the reimbursement. If the employer is too small to be subject to COBRA and its plan is insured, the health insurance carrier will be entitled to the reimbursement.
How Do Employers Get Reimbursed?
Employers can offset any permitted reimbursement from the Medicare taxes withheld from their employees’ wages (all employees, not just assistance eligible individuals), and if those aren’t sufficient, can offset from any required employer Medicare taxes. If the premium assistance provided for a quarter exceeds the Medicare taxes which would otherwise be submitted, the excess is a refundable credit to the employer.
What are the Model Notices For?
For eligible qualifying events on and after April 1, 2021 and prior to September 30, 2021, the qualifying event notice must include a discussion of the availability of the premium assistance/subsidy. The EBSA website includes an updated model qualifying event notice that includes this information. Also, for those assistance eligible individuals who are entitled to the subsidy but are not currently on COBRA, there is a required notice which must be given no later than May 31, 2021. This notice alerts the assistance eligible individual to the availability of the premium assistance, and allows the individual to apply for the assistance. There is also a model notice which allows the assistance eligible individual not currently on COBRA to actually make the affirmative COBRA coverage election.
Finally, ARPA requires that assistance eligible individuals receiving premium assistance be notified of the expiration of premium assistance. A model notice for that is also found on the EBSA website.
As with all DOL model notices, they will need to be customized to accurately reflect an employer’s plan design.
What Do Employers Do Now?
First, identify your assistance eligible individuals and send out the required notices (notice of the premium assistance and the COBRA election notice). Then, update your qualifying event notice to include the discussion of the premium assistance. Ready your expiration of premium assistance notice. And finally, alert your payroll department as to yet another credit you can take advantage of when submitting payroll taxes (no double dipping however with the other available credits).
How Can We Help?
As mentioned above, the model notices do need to be customized. And with so many of them, they can be confusing. We are ready to assist with customizing the notices and sorting through the confusion.
The content in the following blog posts is based upon the state of the law at the time of its original publication. As legal developments change quickly, the content in these blog posts may not remain accurate as laws change over time. None of the information contained in these publications is intended as legal advice or opinion relative to specific matters, facts, situations, or issues. You should not act upon the information in these blog posts without discussing your specific situation with legal counsel.
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