COBRA Subsidies Required under the American Rescue Plan Act of 2021

    The newly enacted American Rescue Plan Act of 2021 (ARPA) includes a COBRA subsidy provision that employers are required to abide by. Under the ARPA, “assistance eligible individuals” (AEI’s) qualify for a 100% subsidy of COBRA premiums between April 1, 2021 and September 30, 2021. This will allow eligible individuals to obtain COBRA continuation coverage on their health plan without paying COBRA premiums. All group health plans subject to COBRA, except health flexible spending accounts (FSA), must provide this subsidized coverage. Depending on the structure of the employer-sponsored plan, the employer, plan, or insurer, will be required to pay the cost of the COBRA premium and then claim the amount as a credit against their quarterly Medicare payroll tax.

    An AEI is defined as a COBRA qualified beneficiary who is eligible for and elects COBRA because of an involuntary termination of employment or a reduction in hours. This includes individuals already on COBRA, individuals within their COBRA election period, and individuals who have dropped COBRA but are still within their COBRA maximum coverage period (e.g.,
    18, 29, 36 months). The bill does not extend the COBRA coverage period and subsidies will only be provided until September 30, 2021 or until the end of the AEI’s applicable COBRA coverage period, whichever comes first.

    Group health plans subject to COBRA must also provide (by May 30, 2021) all AEI’s with a notice on the availability of the subsidy, a notice of the extended election period for COBRA coverage, and a notice of the expiration of the subsidy. This notice must be provided to all AEI’s who received a COBRA notification as far back as November 1, 2019. The Secretary
    of Labor, in consultation with the Secretary of the Treasury and the Secretary of Health and Human Services, are currently drafting model notifications which are scheduled to become available by April 10, 2021. AEI’s will have sixty days from receipt of the notice to elect COBRA coverage, which will be retroactive to April 1, 2021.

    Please contact a FosterThomas advisor for additional guidance on your COBRA subsidy obligations under the ARPA: