The American Rescue Plan Act of 2021 included a COBRA premium assistance program, which subsidizes 100% of the COBRA premiums from April 1, 2021, through September 30, 2021, for individuals who have COBRA coverage during that time period resulting from a reduction in hours or an involuntary termination of employment. The Department of Labor has previously provided guidance about notices that employers must send by May 31, but this guidance did not address many questions that employers have struggled with around eligibility. Moreover, there’s been a great deal of uncertainty around who covers the COBRA premiums and how to get reimbursed.
The IRS has finally issued guidance that answers many of these questions.
Among other things, IRS Notice 2021-31 provides more details around eligibility requirements. For example, Q&As 21-23 deal with reduction of hours situations, and Q&As 24-34 deal with involuntary termination issues. Q&A 17 clarifies that an individual who originally enrolled in and continued to be covered under COBRA because of a reduction in hours or involuntary termination of employment is also eligible for COBRA subsidies if the COBRA coverage is extended because of a disability determination, a second qualifying event or an extension under a state’s COBRA law, if the extended coverage period falls between April 1, 2021, and September 30, 2021.
But what employers will probably find the most helpful are the sections dealing with the COBRA Premium Assistance Credit in Q&As 63-86. In particular, Q&A 71 states that the “premium payee” is the entity that is eligible for the credit, and Q&A 72 defines the premium payee as:
- For a group health plan that is a multiemployer plan, the multiemployer plan.
- For a group health plan other than a multiemployer plan, the employer that maintains a plan that is either of the following:
- A group health plan subject to Federal COBRA requirements.
- Any group health plan that is self-funded in whole or in part.
- For any other fully-insured group health plan (typically a plan that is only subject to state continuation coverage requirements), the insurer providing the coverage.
This means that most employers, even those with insured coverage, will have to cover the cost of the premium and request a rebate from the federal government. The IRS has also released Form 7200 and its instructions, which provide additional details on how to request the rebate.
If you need assistance with COBRA subsidy issues, Warner can help! Please contact Norbert Kugele, Stephanie Grant or any other member of Warner’s Employee Benefits/ Executive Compensation Practice Group.
