Most Of What You Need To Know About COBRA and The American Rescue Plan Act…

The American Rescue Plan Act was signed by President Joe Biden on March 11th, 2021. This is a stimulus bill that is part of the COVID-19 economic relief package. The law states that individuals who are entitled to COBRA coverage between 4/1/2021 through 9/30/2021 due to loss of coverage under a group health plan resulting from involuntary loss of employment hours, be provided with a 100% subsidy for their COBRA premium due during this period. The employer will be responsible for the additional coverage, they can recover the subsidy via quarterly employment tax credits.

Current COBRA Members

Participants whose prior qualifying event was due to involuntary loss of employment or involuntary reduction of hours, and who would have a premium payment due between April 1 2021 and September 30, 2021, will be entitled to a full subsidy for their COBRA coverage between those months. For employees who did not choose COBRA coverage during the election period, as well as those who did initially choose COBRA and let their coverage lapse the subsidy is also available to them.

Which Benefits Qualify for the Subsidy?

Continuation coverage must be provided under a group health plan, including medical, dental, and vision. Health flexible spending arrangements under a cafeteria plan do not qualify for the subsidy.

Notices to Give Participants

  • Election notices or a supplement to election notices which will advise them of the premium assistance
  • An option to enroll in a different plan if it’s provided by the employer
  • Notice to extend the election periods
  • Notice of expiration of the premium assistance period

Can An Individual Enroll In Another Group Plan Through Their Employer?

An employer can allow Assistance Eligible Individuals 90 days to enroll in another group plan offered by them. However, the premium cannot be more than the plan that they were enrolled in during this time.

Who is Eligible to Receive the Subsidy?

  • The employer, if otherwise subject to COBRA or other federal coverage continuation laws and the Employer for either partially or completely self-funded plans
  • The PEO for multi-employer- group plans
  • The insurer for fully-funded group plans not otherwise subject to COBRA (or other health continuation laws) (ie., fully-funded group plans for employers with less than 20 employees)

Receiving the Subsidy

In order to receive the subsidy, the PEO/Employer/Insurer will get a credit on their taxes of up to the amount of any such employment tax imposed for the calendar quarter. The PEO/Employer/Insurer will receive a refund (if applicable) on any amount that exceeds the amount of the employment tax imposed as an overpayment from the federal government. An advance of the credit owed (including any anticipated overpayment refundable amount) can be sought through the end of the most recent pay period.

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