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ML BeneBits

As we described in our March 15, 2021 LawFlash, the American Rescue Plan Act of 2021 (ARPA) includes a 100% COBRA premium subsidy for any employee or dependent who is a COBRA qualified beneficiary (or will become one) resulting from an involuntary termination of employment or a reduction of hours (referred to as an Eligible Individual).

The APRA requires plan sponsors to provide specific notification of the COBRA premium subsidy to Eligible Individuals, along with notification of any early termination of the subsidy prior to September 30, 2021 (with certain exceptions). In addition, the ARPA requires the secretary of the Department of Labor, in consultation with the secretary of the Department of the Treasury and the secretary of the Department of Health and Human Services (collectively, agencies), to provide model notices within 30 days of enactment. In accordance with that requirement, the Department of Labor’s Employee Benefits Security Administration issued model notices on April 7, 2021 which can be used to satisfy the notice requirements, along with a set of FAQs which answers some outstanding questions, but leaves many questions unanswered, such as the mechanics of the payroll tax credit and the interaction of the subsidy with existing severance agreements or subsidized COBRA coverage. We expect that the Internal Revenue Service will issue additional clarifying guidance on some of the outstanding issues soon.

Some of the clarifications made in the FAQ guidance include:

  • Eligible Individuals must effectively opt in to receive the COBRA premium subsidy and plan sponsors are not required to provide the subsidy automatically. Such opt in can be made through the model “Summary of the COBRA Premium Assistance Provisions under the American Rescue Plan Act of 2021” which includes a “Request for Treatment as an Assistance Eligible Individual” form for an Eligible Individual to attest that he or she is eligible for the COBRA premium subsidy because he or she had a COBRA qualifying event due to any reduction in hours or involuntary termination of employment and is not eligible for Medicare or any other group health plan coverage. The inclusion of this summary and form may indicate that the agencies will allow a plan sponsor to rely on the attestation rather than making the determination whether someone is an Eligible Individual itself, but additional guidance on this point would be helpful.
  • The COVID-19 COBRA deadline extension guidance (described in our Blog Post dated March 1, 2021) does not apply to the notices or the election deadlines related to COBRA subsidies under the ARPA.
  • Notices required under ARPA are only required to be sent to Eligible Individuals.
  • Eligible Individuals only include those people who lost coverage due to an involuntary termination of employment or a reduction in hours, regardless of whether such reduction in hours was voluntary or involuntary.
  • COBRA premium subsidy is available to all group health plans subject to COBRA.

The model notices and FAQ guidance are published on a dedicated COBRA Premium Subsidy page at https://www.dol.gov/COBRA-subsidy. While the guidance indicates that use of the models is optional, it also provides that appropriate use of the models is considered to be good faith compliance with the requirements and therefore, we recommend that plan sponsors use the models rather than create one on their own.