April 21, 2021
The recently enacted American Rescue Plan Act of 2021 imposes new group health plan continuation coverage obligations on employers. The new law requires employers to subsidize 100 percent of COBRA premiums for the six month period from April 1, 2021 to September 30, 2021 (the “Subsidy Period”) for individuals who lose group health plan coverage due to lost employment or reduced hours. The Act requires employers subject to COBRA to provide eligible individuals with a notice describing the right to subsidized coverage. The notice also must describe the provisions that give eligible individuals an extended election period and give them the right to enroll in different employer provided coverage from the coverage in effect for such individual immediately before the time a qualifying event occurs. The Department of Labor and the Treasury Department have published model notices that can be used by employers to satisfy the detailed notice requirements under the Act.
Any COBRA premium for coverage during the Subsidy Period will be treated as fully paid by the eligible individual who makes a COBRA continuation coverage election. The premium assistance subsidy is excluded from the eligible individual’s gross income. The employer cost of providing such coverage will be eligible for a tax credit on the amount of the employer’s share of the hospital insurance portion of FICA. Any excess tax credit is a refundable credit. The Plan Administrator also is required to provide a notice prior to the end of the subsidy period applicable to each eligible individual to notify them of the date that premium assistance ends and specify any remaining available unsubsidized COBRA coverage eligibility.
The extension of the election period permits an individual who experienced a qualifying event prior to the Subsidy Period and does not have a COBRA election in effect on April 1 or an individual who elected COBRA continuation coverage and discontinued such coverage before April 1, 2021 to make a new election during the period beginning April 1 and ending with the date that is 60 days after the date the individual is provided the required notice. The notice must be provided to eligible individuals who experienced a qualifying event prior to April 1, 2021 within 60 days from April 1. An eligible individual will have up to 90 days after the date of the required notice to change coverage enrollment options to a different coverage option or plan offered by the employer.
Please contact me if you have questions regarding the implementation of these new COBRA requirements.
Robin M. Schachter
Robin M. Schachter Law
Robin@rmschachterlaw.com
(310) 748-4475
www.rmschachterlaw.com