On March 11, 2021, the American Rescue Plan Act of 2021 (“ARPA”) was enacted, creating a new election period for COBRA continuation coverage and imposing new subsidy and notice requirements. Starting April 1, 2021, employers with 20 or more employees must subsidize 100% of COBRA premiums for assistance-eligible individuals (“AEI”) from April 1, 2021 through September 30, 2021 (the “Subsidy Period”). Employers are required to pay for the subsidy but may seek reimbursement through a quarterly Medicare tax credit.
AEIs include those who (1) are eligible for COBRA coverage during all or part of the Subsidy Period due to either involuntary termination of employment (for reasons other than gross misconduct) or a reduction in hours; and (2) elect COBRA coverage during the Subsidy Period or are already enrolled in COBRA on April 1, 2021. Also, an individual who would otherwise qualify as an AEI but who failed to elect, or discontinued, COBRA coverage before April 1, 2021 is eligible. However, such individuals must elect coverage within 60 days of being notified of the new election period. Employees who voluntarily resign their employment are not eligible for the subsidy.
While ARPA creates a new election period for certain individuals, it does not extend the COBRA coverage period. An individual’s status as an AEI ends upon the earlier of the following dates: (1) the date the individual becomes eligible for another group health plan (other than excepted benefits, flexible spending accounts, or qualified small employer health reimbursement arrangements) or Medicare; or (2) the date following the expiration of the individual’s COBRA coverage period measured from the original qualifying event. An AEI must notify their group health plan when they are no longer eligible for a subsidy due to becoming eligible for another group health plan or Medicare.
ARPA imposes the following notice requirements on employers/plan administrators:
- Election Notice: AEIs who (1) previously failed to elect COBRA, (2) discontinued COBRA coverage, or (3) have yet to elect COBRA coverage but remain eligible under the usual COBRA rules must be notified of their rights by May 31, 2021. The Department of Labor (“DOL”) must issue a model Election Notice by April 10, 2021.
- Premium Assistance Notice: If an AEI becomes COBRA eligible during the Subsidy Period, a COBRA election notice must be sent within the normal notice requirements but must include detailed information about the subsidy. The DOL must issue a model Premium Assistance Notice by April 10, 2021.
- Subsidy Termination Notice: Plan administrators must notify individuals that the Subsidy Period is ending at least 15 days but no more than 45 days in advance of the termination date. Notice is not required if the subsidy will terminate due to the individual’s eligibility for other coverage. The DOL must provide model notices for this provision by April 25, 2021.
Employers/plan administrators will need to rapidly begin preparing for compliance with these new COBRA requirements and should consult with their health insurers or third-party administrators. As employers navigate these issues, our Firm’s labor and employment attorneys listed below are standing by to provide legal advice.