As detailed in our March 17 Alert, the American Rescue Plan Act of 2021 (ARP) provides for a temporary 100 percent COBRA subsidy for eligible individuals whose qualifying event was an involuntary termination of employment or reduction in hours. The subsidy under the ARP is in effect from April 1, 2021, through September 30, 2021.
The ARP makes the subsidy available for "Assistance Eligible Individuals." An assistance eligible individual is a COBRA-qualified beneficiary who meets the following requirements during the period from April 1 through September 30, 2021:
- Is eligible for COBRA continuation coverage by reason of a qualifying event that is a reduction in hours or an involuntary termination of employment; and
- Elects COBRA continuation coverage.
However, an individual is not eligible for the subsidy if they are eligible for other group health coverage, such as through a new employer's plan or a spouse's plan, or if they are eligible for Medicare.
On April 7, 2021, the Department of Labor issued the model forms that will be used to notify individuals of the COBRA subsidy and provide information about their rights under the ARP.
The model notices published are:
- A " Model ARP General Notice and COBRA Continuation Coverage Election Notice" for all qualified beneficiaries who have a qualifying event from April 1 through September 30, 2021.
- A " Model COBRA Continuation Coverage Notice in Connection with Extended Election Periods" for any assistance eligible individual (or any individual who would be an assistance eligible individual if a COBRA continuation coverage election were in effect) who had a qualifying event before April 1, 2021. This notice must be provided by May 31, 2021.
- A "Notice of Expiration of Period of Premium Assistance" explaining that the subsidy for the individual will expire soon, the date of the expiration and that the individual may be eligible for coverage without any subsidy through COBRA continuation coverage or coverage under a group health plan. This notice must be provided 15-45 days before the individual's subsidy expires.
It should be noted that the Department of Labor also confirmed that its outstanding guidance extending time frames for certain actions related to health coverage under COBRA does not apply to the notices or the election periods related to COBRA premium assistance available under the ARP. Therefore, plans must provide the notices outlined above according to the specified time frames or face potential penalties.
Request for Treatment as an Assistance Eligible Individual
In addition to publishing the model forms, the Department of Labor also published a " Summary of the COBRA Premium Assistance Provisions under the American Rescue Plan Act of 2021." This document must accompany the required notices and will provide individuals with important information regarding their eligibility for the subsidy.
To the extent that an individual believes they meet the criteria for premium assistance under the ARP, they will need to complete the "Request for Treatment as an Assistance Eligible Individual" and return it with their completed election form, or separately if they are already enrolled in COBRA continuation coverage. If the form is not completed and returned within 60 days of receipt, the individual may be unable to receive the premium assistance.
The "Request for Treatment as an Assistance Eligible Individual" will require that the individual certify that they meet the following eligibility requirements:
- The qualifying event was a loss of employment that was involuntary or a reduction in hours;
- The individual elected (or is electing) COBRA continuation coverage;
- The individual is not eligible for other group health plan coverage (or was not eligible for other group health plan coverage during the period for which they are claiming premium assistance); and
- The individual is not eligible for Medicare (or was not eligible for Medicare during the period for which they are claiming premium assistance).
Now that the Department of Labor has published the necessary model forms for premium assistance under the ARP, employers should continue identifying all eligible individuals and provide them with the required notices. For employers who use a third party for assistance with COBRA administration, the employer should work with its third-party administrator to ensure that the appropriate notices are timely distributed.
Employers should also be aware that additional guidance will be coming from the Internal Revenue Service on the ARP and its premium assistance provisions. While the publication of model notices is helpful in allowing employers to move forward, guidance from the Internal Revenue Service will be instrumental in resolving uncertainties surrounding issues such as the availability of the tax credit to employers when they have previously agreed to subsidize a former employee's COBRA premiums and what terminations may be treated as involuntary for purposes of the ARP.
For More Information
If you have any questions about this Alert, please contact any of the attorneys in our Employee Benefits and Executive Compensation Group or the attorney in the firm with whom you are regularly in contact.
Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.