On July 26, 2021, the IRS issued Notice 2021-45 to supplement its guidance on COBRA premium assistance in Notice 2021-31. This round of Q&As focuses heavily on clarifying which entity is entitled to claim the premium assistance credit.

  • Extended Coverage Periods
    Where an individual's original 18-months of COBRA continuation coverage arising from a reduction in hours or involuntary termination of employment expired prior to April 1, 2021, the individual may still qualify for premium assistance if a disability determination, second qualifying event or extension under state-mandated continuation coverage occurs that extends the individual's maximum continuation period beyond April 1, 2021. This is the case even if the individual has not yet notified the plan or insurer of the occurrence of the extension-triggering the event or his or her intent to elect to extend the continuation coverage.
  • Premium Assistance for Dental-Only and VisionOnly Coverages
    An individual with dental-only and/or visiononly continuation coverage will cease to be eligible for COBRA premium assistance if he or she subsequently becomes eligible to enroll in other disqualifying group health plan coverage or Medicare, even if the other coverage does not include the dental and/or vision benefits provided by the previously elected COBRA continuation coverage.
  • State Continuation Coverage
    Premium assistance is available to individuals enrolled in a state continuation coverage even if participation is limited to only a subset of residents (e.g., state employees only) as long as the coverage is comparable to Federal COBRA
  • Claiming the Premium Assistance Credit
    The new guidance offers the following clarifications on which entity, a "Premiuim Payee", is entitled to claim the premium assistance credit:
    • For a group health plan that is subject to Federal COBRA or is not subject to Federal COBRA but is self-funded, the common law employer maintaining the plan is the Premium Payee with respect to the assistance eligible individuals whose reduction in hours or involuntary termination serves as the basis for the individual's eligibility for continuation coverage
    • For a group health plan subject to both Federal COBRA and state-mandated continuation coverage, the common law employer is the Premium Payee even if the state-mandated continuation coverage requires individuals to pay the premiums directly to the insurer after the period of Federal COBRA ends.
    • If a group health plan (other than a multiemployer plan) subject to Federal COBRA covers the employees of two or more employers (regardless of whether the employers are part of the same controlled group or are unrelated employers), each common law employer is entitled to the credit for its respective employees or former employees, except to the extent a third-party payer is the Premium Payee, as described in Notice 2021-31, Q&A-82 (e.g., PEO), or in certain business reorganization situations.
    • An entity that provides health benefits to the employees of another entity (e.g., MEWA) may not claim the premium credit unless the entity is a third-party payer of such employees' wages. The respective common law employers are the Premium Payees.
    • If a selling group remains obligated to make COBRA continuation coverage available to the M&A qualified beneficiaries after a business reorganization (e.g., stock or asset sale), the entity in the selling group that maintains the group health plan is entitled to the premium credit.
    • A state agency maintaining a group health plan that covers employees of various state agencies and local governments and is subject to Federal COBRA is the Premium Payee if it usually receives the COBRA premium payments.
    • An employer offering fully insured health coverage, which is not subject to Federal COBRA, through its participation in a Small Business Health Options Program (SHOP) exchange is entitled to the premium credit if: (1) the SHOP exchange offers multiple insurance choices to the employees; (2) the SHOP exchange provides a single invoice to the employer with all premiums aggregated and allocates and pays the applicable premium amounts to the insurers; (3) the employer has a contractual obligation to pay all applicable COBRA premiums to the SHOP exchange; and (4) the employer would have received the state continuation coverage premiums directly from the assistance eligible individuals in the absence of the COBRA premium assistance.

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.