Under the American Recovery Plan Act of 2021 (“ARPA”), which President Biden signed on March 11, 2021, the federal government must reduce COBRA premiums for certain COBRA-eligible individuals for insurance periods between April 1, 2021 and April 20, 2021. Fully subsidize April 30, 2021 September 30, 2021. While the federal government will bear the ultimate financial burden of the grant, employers and plan sponsors will have to grapple with the logistics of managing the grant, including notifying eligible individuals and covering the cost of the monthly Bonus. On April 7, 2021, DOL published a series of Frequently Asked Questions (FAQs) designed to help employers and sponsors implement the grant.
The COBRA grant, which is 100% of the monthly premium in addition to the 2% administration fee, applies to employer-sponsored group health plans, multi-employer plans, government plans, and plans subject only to state “mini-COBRA” laws (i.e. . H. based on their size). The grant does not apply to coverage under a Flexible Health Expenditure Agreement (“FSA”). This means that participants can choose to continue making contributions to their FSA but are responsible for making such contributions.
The grant is only available to “Eligible Eligible Persons” defined by ARPA as a COBRA Qualified Beneficiary who:
- Had a qualifying event that represented a reduction in working hours or involuntary termination of employment;
- Choose COBRA cover;
- You are not eligible for coverage under any other group health plan (that is, under a new employer or spouse plan). and
- Are not eligible for Medicare.
As explained below, former employees who have individual coverage, e.g. B. be eligible for the grant through a health insurance market (or an “exchange”). Former employees who terminated their employment for any other reason (e.g. voluntary termination or termination due to gross misconduct) are not entitled to the grant.
While the maximum duration of the subsidy is six months, eligible persons who are entitled to support lose the subsidy prematurely if:
- You are entitled to a different group health plan. or
- You have reached the end of your maximum COBRA coverage period (usually 18 months for a reduction in working hours or an involuntary termination of the employment relationship without a subsequent qualifying event such as a disability). If an eligible person’s COBRA coverage period begins after April 1, 2021 or ends before September 30, 2021, the grant will be less than six months.
Eligible persons are responsible for notifying their previous employers if they are eligible for alternative group insurance. Failure to do so could result in a tax penalty.
If an eligible person receives the COBRA grant for the entire six months but has not exhausted their maximum COBRA coverage period by September 30, 2021, they may continue to receive COBRA coverage as long as they make the appropriate transfer of the COBRA premium (es unless the authorized person is not obliged to do so based on an agreement with their previous employer).
In addition to the COBRA grant, ARPA offers an additional electoral term for COBRA-qualified beneficiaries (including family members) who experienced an involuntary termination or reduction in working hours prior to April 1, 2021, but at that time either did not or did not choose COBRA coverage choose COBRA, but are no longer enrolled (for reasons other than the end of your maximum COBRA coverage period). However, this “second bite on the apple” does not extend the maximum COBRA coverage period. For example, an Eligible Person who, prior to April 1, 2021, had two months before the end of their maximum COBRA Coverage Period would have only two months of additional coverage and two months of Subsidy. Conversely, an eligible person who, prior to April 1, 2021, had eight months before the end of their maximum COBRA coverage period was reached, is entitled to the full eight months of additional coverage, but only to six months of subsidized coverage (assuming the coverage and subsidization do not end prematurely).
ARPA allows employers and plan sponsors the discretion regarding an issue – the ability to allow Eligible Eligible Individuals to switch their coverage to another coverage option offered by the employer or plan sponsor. For example, if an employer has three plans to choose from for employees – an HMO, an EPA, and a PPO – and an Eligible Person falls under the HMO option at the time of their qualifying event, the employer may allow Eligible Individuals to assist at the time of the COBRA -Change registration to EPA or PPO option.
In particular, in its Frequently Asked Questions, DOL made it clear that a person will lose eligibility for the subsidy if:
- The COBRA Premium calculated for the different coverage option is equal to or lower than the COBRA Premium calculated for the coverage that the Eligible Eligible Person had at the time of their qualifying event.
- The different coverage option is offered to similarly located active employees. and
- The different coverage is not limited to exempted benefits, a qualified health insurance agreement for small employers or a flexible health expense account.
Eligible Beneficiaries are not responsible for paying COBRA Awards for coverage between April 1, 2021 and September 30, 2021. Employers or plan sponsors pay the full premium directly and are then reimbursed through quarterly tax credits. If an Eligible Person pays a COBRA Award during the Grant Period, that person’s previous employer or plan sponsor must reimburse that person for the amount paid (or a credit towards future payments after September 30, 2021).
Since authorized persons are now entitled under federal law to release COBRA cover for six months, employers cannot offer COBRA cover as consideration in a separation agreement for a dismissal from a person entitled to assist during this time. In addition, separation agreements cannot stipulate that individuals who are entitled to assistance pay the COBRA coverage after their last working day or after the last day of the month in which their working hours were reduced or involuntarily terminated from now until September Must 30, 2021. However, an employer may choose to continue the paid COBRA after the six month grant period has expired to consider releasing claims.
Employers and plan sponsors must now inform the entitled entitled persons of their extended COBRA rights and be entitled to the COBRA grant within certain periods of time. Specifically, employers and plan sponsors must provide:
- A general notice to all Qualified COBRA Beneficiaries who have a Qualified Event representing a reduction in working hours or involuntary termination of employment between April 1, 2021 and September 30, 2021. This notification can be made on its own or during the COBRA election.
- Notification of the additional electoral period for eligible persons who have experienced a qualified event before April 1, 2021, which involved a reduction in working hours or an involuntary termination of the employment relationship and who have not yet reached the end of their maximum COBRA coverage period. This notification must be received by May 31, 2021 and individuals have 60 days from notification to select COBRA coverage.
- A notification of the end of the grant to be given to the eligible person between 15 and 45 days before the end of the grant.
The notices must contain the following:
- The forms required to determine eligibility;
- Contact information for the plan administrator or other person responsible for the grant;
- A description of the eligibility and eligibility requirements;
- If applicable, a description of the extended electoral term;
- A description of the option to register for another available coverage option, if applicable; and
- A description of the requirement that the eligible person notify the employer or plan sponsor if he or she is eligible for coverage under another group health plan or Medicare, and the penalty for failing to do so.
DOL has issued sample notices (available here) that provide sample language that employers and plan sponsors can tailor to their own needs.
Employers and Plan Sponsors who do not meet COBRA coverage requirements, including ARPA extended coverage requirements, may be subject to an excise tax of $ 100 per Qualifying Beneficiary (maximum of $ 200 per family).
Action elements
To meet ARPA’s expanded COBRA coverage requirements and avoid potential excise tax, employers and plan sponsors must:
- Review their files to identify previous COBRA-qualified beneficiaries eligible for ARPA’s extended term.
- Update the relevant notice and distribute it to Eligible Eligible Individuals (including Qualified Retirees) in a timely manner.
- Decide whether or not to allow Eligible Individuals to sign up for a coverage option that is different from the one they were signed up for at the time of their qualifying event.
- Review any separation agreements in the pipeline to ensure that COBRA coverage is not offered in exchange for a release of an eligible individual from now until September 30, 2021.
- Update internal processes to reflect these changes (for example, to ensure that non-payment of rewards during the six month period does not end COBRA coverage for those eligible for assistance).
- Coordinating with payroll clerks to apply for quarterly tax credit; and
- Prepare appropriate changes to internal policies, health plans, and summary plan descriptions.