ARPA requires employers, insurers and plans to pay 100% of the required premium for continuation coverage during a subsidy period extending from April 1, 2021 through September 30, 2021 on behalf of "Assistance Eligible Individuals". Such premium expenses are reimbursed by the federal government through refundable FICA tax credits. We previously summarized the COBRA premium assistance under ARPA in a blog post, available by clicking here.
On April 7, 2021, the DOL provided guidance in the form of FAQs published on a dedicated COBRA premium assistance website, which also includes the following model notices:
- A model ARPA general notice and COBRA election notice
- A model COBRA continuation coverage notice and election form for second election opportunity
- A model alternative notice for use with insured coverage subject to state "mini-COBRA" requirements
- A model notice of expiration of the COBRA premium assistance for plans to notify Assistance Eligible Individuals 15-45 days before expiration of their COBRA premium assistance
- A summary of the COBRA premium assistance provisions
The DOL will consider use of the model notices to be good faith compliance with the COBRA and ARPA notice obligations.
The IRS subsequently issued Notice 2021-31 on May 18, 2021, providing its own guidance on COBRA premium assistance in a Q&A format. Key points for employers from the DOL and IRS guidance are summarized below.
Assistance Eligible Individual (AEI)
- An Assistance Eligible Individual (or AEI) is an individual who
(1) is a qualified beneficiary who is eligible for COBRA
continuation coverage during all or part of the subsidy period by
reason of an involuntary termination of employment or reduction in
hours and (2) elects COBRA continuation coverage.
- An AEI includes a qualified beneficiary whose continuation coverage extends into the subsidy period as the result of the extension of the usual maximum COBRA continuation period due to a disability determination or second qualifying event; provided the original qualifying event was a reduction in hours or an involuntary termination of employment.
- Only a termination of employment that is involuntary can qualify an individual for premium assistance but a reduction in hours can be voluntary or involuntary. For example, a reduction in hours due to a change in the company's hours of operation, transferring from a full-time position to a part-time position, a temporary leave of absence, and participation in a lawful labor strike all count as a qualifying reduction in hours.
- Involuntary termination for gross misconduct does not qualify for the COBRA premium assistance.
- Since only qualified beneficiaries can be AEIs, a spouse, or dependent child who subsequently is enrolled in plan coverage by a qualified beneficiary during an annual enrollment period occurring after the COBRA qualifying event and domestic partners do not qualify for premium assistance.
- An AEI will not qualify for premium assistance if eligible for
other group health coverage, such as through a new employer's
plan, a spouse's plan, or Medicare. However, individuals with
individual health insurance coverage or Medicaid are permitted to
switch to COBRA coverage and apply for the premium assistance.
- An individual is considered "eligible" for other health coverage or Medicare only if he or she can enroll in such coverage. For example, an AEI who was eligible for other group health plan coverage or Medicare at the time he or she lost coverage due to a reduction in hours or involuntary termination but did not enroll remains eligible for premium assistance if he or she is unable to enroll in that other coverage (e.g., applicable enrollment period has expired).
- An offer of retiree coverage under the same group health plan will not adversely impact the AEI's eligibility for COBRA premium assistance
- individuals to provide a self-certification or attestation regarding their eligibility status with respect to a reduction in hours or involuntary termination of employment and/or their eligibility for disqualifying health plan coverage or Medicare. Employers can rely on the self-certification or attestation for purposes of substantiating eligibility for the credit, unless the employee has actual knowledge that the attestation is incorrect.
- An individual can qualify as an AEI more than once.
To view the full article click here
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.