On April 7th, the United States Department of Labor issued detailed guidance and model notices to assist employers in implementing the COBRA premium assistance requirement under Section 9501 of the American Rescue Plan Act of 2021 (the ARP).
The ARP requires employers to provide a 100 percent COBRA premium subsidy – between April 1, 2021 and Sept. 30, 2021 – for employees whose reduction in hours or involuntary termination of employment makes them eligible for COBRA continuation coverage during this period. An employer or plan to whom COBRA premiums are payable, advances the COBRA premium and is then entitled to a tax credit for the amount of the premium assistance provided.
The COBRA premium assistance provisions apply to all group health plans sponsored by private-sector employers or employee organizations (unions) subject to the COBRA rules under the Employee Retirement Income Security Act of 1974 (ERISA). They also apply to plans sponsored by State or local governments subject to the continuation provisions under the Public Health Service Act. Premium assistance is also available for employees of smaller employers (under 20 employees) not subject to COBRA but subject to state mini-COBRA laws such as those in New Hampshire and Massachusetts.
The ARP requires employers and group health plans to provide notices to individuals losing health coverage to inform them about premium assistance that may be available. The ARP also provides additional enrollment options for individuals who had an involuntary termination of employment or reduction in hours within the last 18 months and did not timely elect COBRA or dropped COBRA. These individuals have a new 60-day election period following the date that they receive a new required COBRA notice. The ARP does not change any existing COBRA notice and election rules and is independent of, and not impacted by, the relief provided to impacted employee benefit plan participants, including the 60-day initial election period for COBRA continuation coverage as described in EBSA Disaster Relief Notice 2021-01.
The next steps for employers are to (1) identify any employees and former employees and their dependents who are assistance-eligible and (2) arrange for a notice to those individuals of their eligibility for the subsidy no later than May 31, 2021. Again, this requirement applies to most New Hampshire and Massachusetts employers. Employers who have entered into settlement agreements that contains provisions relating to COBRA should also be reviewed as these former employees will need to be offered premium assistance. New settlement agreements will need to address the premium subsidy as well.
Additional information on the ARP premium assistance requirements and model notices that can be used by employers and service providers to notify eligible individuals can be found at:
https://www.dol.gov/agencies/ebsa/laws-and-regulations/laws/cobra/premium-subsidy
The ARP also requires that plans and issuers provide individuals with a notice of expiration of periods of premium assistance. Eligibility for premium assistance ends when an employee become eligible for another group health plan, such as a plan sponsored by a new employer or a spouse’s employer, the employee becomes eligible for Medicare, or the employee reaches the end of the maximum COBRA continuation coverage period.