United States:
ARPA COBRA Grant: DOL publishes model releases, punts (to IRS?) On most open questions
April 12, 2021
Seyfarth Shaw LLP
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Seyfarth Synopsis: As discussed in our March 11, 2021 alert, Congress has made yet another avenue of health insurance more accessible by reducing the cost of COBRA coverage from April 1 to September 30, 2021 for people who are due to their health insurance have lost involuntary health insurance, fully subsidized termination, or cut working hours under the American Rescue Plan Act of 2021 (ARPA). On April 7, 2021, the Department of Labor (DOL) published Frequently Asked Questions (FAQs) to further explain this COBRA subsidy and provided models of the required related notices.
Notable points from the FAQs
- Eligibility based on hour reduction. The FAQs detail when a reduction in working time is a qualifying event (making it clear that “involuntarily” does not change the triggering of the working time reduction) and states that the following situations are covered: “Reduction of the Working time due to a change in business hours of operations, a change from full-time to part-time status, temporary vacation or participation in a legal labor strike, as long as the person remains an employee at the time of the reduction in working hours. “Upon termination of employment, an employee can only then be eligible if it is involuntary. (The guidelines did not define what constitutes involuntary termination, but it was made clear that exclusions for gross misconduct still apply.)
- Interaction with the DOL outbreak period. The election extension according to the guidelines of the DOL outbreak period (which generally charges the COBRA election window for up to one year) does not apply to the newly created 60-day election window under the ARPA. In other words, eligible individuals who do not choose COBRA within 60 days of receiving notification will not be eligible for a subsidy. (You may still qualify for COBRA under the rules of the DOL Outbreak Period, but this is at your own expense.)
Similarly, the deadline to extend the notice period for DOL Facilitation does not apply to the terminations required by the ARPA (termination of the general election or termination of the pending expiry of the subsidies, see below).
- Effects of the employer’s COBRA subsidy. The Frequently Asked Questions misses one of the most important questions many employers have asked themselves: If the employer subsidizes COBRA through a severance pay agreement, does it reduce the amount of tax credit that the employer may claim? The guidelines simply state: “An employer or plan to which COBRA awards are payable is entitled to a tax credit equal to the award assistance.”
- Deadline for distributing a new election notification. The Frequently Asked Questions states that the distribution deadline for the new ARPA general election notice is May 31, 2021. Any reporting selected in accordance with this general announcement applies retrospectively for the first reporting period beginning on or after April 1, 2021. Employees can only opt for enrollment prospectively after receipt of the notification (this late enrollment does not, however, extend the subsidy window). A person may want to delay registration if they were registered for marketplace coverage and received a tax credit (as the subsidized COBRA could make that person ineligible for the tax credit).
- Time of election for attendee coverage. If an individual believes they are eligible for the COBRA grant, that individual can contact the COBRA administrator or plan administrator and request enrollment rights prior to receiving the election notification. If the person is correct that they qualify, the plan cannot require the person to pay a premium (even if they intend to reimburse it later after the election notification expires). Most likely, however, the person would have to return the election notification later (which certifies that the employer is eligible for the grant).
- Plan may not require payment of the administration fee. The Frequently Asked Questions clarifies that the eligible person cannot be charged any fees for COBRA (the plan cannot charge the participant an administration fee).
- Marketplace special registration when the subsidy expires. The Frequently Asked Questions (FAQs) indicate that a subsidy expiration “may” be a special registration event for the marketplace. It is unclear whether this indicates that offering such a special registration is at the discretion of the marketplace / operator or whether it is necessary.
New model notes
Under ARPA, employers must inform Qualified Beneficiaries of the availability of this COBRA grant and the rights associated with it. The DOL provided the following model references, as detailed below:
- Note: General remark.
Deadline: 60 days after qualifying (normal COBRA procedure).
description: This notice applies to plans subject to federal COBRA to be posted to anyone attending a Qualifying Event between April 1, 2021 and September 30, 2021 (including voluntary terminations). It is essentially the general DOL COBRA standard message with ARPA information interwoven throughout. Although this notice can be provided separately or with the standard COBRA general notice, it is useful to use the ARPA general notice during the relevant period rather than providing two sets of notices to subscribers. - Note: Alternative note
Deadline: Normal deadlines.
description: This notification is an option for plans subject to state mini-COBRA laws (not federal COBRA). You can send to people who attend a Qualifying Event (including voluntary terminations) between April 1, 2021 and September 30, 2021. - Note: Announcement of the extended electoral term.
Deadline: May 31, 2021.
description: This is the notice for people who have had COBRA qualifiers in the past. This applies to people who have lost federal COBRA coverage due to an involuntary termination of their employment relationship or a reduction in working hours, which usually takes place between October 1, 2019 and March 31, 2021. * By May 31, 2021, employers must inform these individuals that they have special insurance and have a 60-day opportunity to prospectively choose COBRA between April 1, 2021 and September 30, 2021. The COBRA coverage period must not exceed the coverage period to which you would otherwise have been entitled in connection with the original qualifying event. - Note: Application for treatment as an eligible person
Deadline: Corresponds to the deadline for the above notification.
description: This should be added to the three notes listed above. It is the form that individuals must fill out to request premium assistance. - Note: Announcement about the expiry of the funding period.
Deadline: 15-45 days before the end of the subsidy.
description: ARPA also requires notification when Award Aid expires. The notification must be sent no later than 45 days after the expiry and at least 15 days after the expiry. It must be sent to anyone whose federal or state subsidized mini-COBRA ends between April 1, 2021 and September 30, 2021, and will continue to be eligible for more COBRA coverage after the subsidy ends.
The Frequently Asked Questions (FAQ) stipulates that if the above notices are not provided in a timely manner, employers may be subject to an excise tax of $ 100 per Qualified Beneficiary per day, which cannot exceed $ 200 per family per day.
The content of this article is intended to provide general guidance on the subject. A professional should be obtained about your particular circumstances.
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