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The American Rescue Plan Act’s COBRA Subsidy Soon Expires & Employers are Required to Notify Impacted Individuals
The temporary Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) health insurance premium subsidy Congress granted to eligible individuals through the American Rescue Plan Act of 2021 (the ARP) will expire at the end of September 2021. Employers should be aware of their obligation to notify COBRA recipients.
Under COBRA, employer group health plans must provide qualified individuals with temporary continuation of group health coverage that might otherwise end. ARP provides eligible individuals (individuals who experience a COBRA-qualifying event that is a reduction in hours or an involuntary termination of an individual’s employment) with a 100% subsidy of the monthly premium the individual would otherwise owe for COBRA coverage. An employer or plan to whom COBRA premiums are payable is entitled to a tax credit for the amount of the premium assistance. This subsidy expires on September 30, 2021 for individuals who otherwise remain qualified for COBRA coverage at that time.
ARP also requires employers to provide individuals with a notice of expiration of the premium subsidy. Employers must provide this notice between 15 and 45 days before the individual’s premium subsidy expires. For eligible individuals whose COBRA coverage expires earlier than September 30, 2021, this 15 to 45-day notice period may have already expired depending on each employee’s specific coverage end date. For individuals whose COBRA coverage ends on or after September 30, 2021, the expiration notice must be sent between August 16 and September 15, 2021 in most instances.
The US Department of Labor (DOL) has indicated the notice must include the following information:
- The forms necessary for establishing eligibility for the premium assistance;
- Contact information for the plan administrator or other person maintaining relevant information in connection with the premium assistance;
- A description of the additional election period (if applicable to the individual);
- A description of the requirement that the individual notify the plan when he/she becomes eligible for coverage under another group health plan (not including excepted benefits, Qualified Small Employer Health Reimbursement Arrangements, or a health FSA), or eligible for Medicare and the penalty for failing to do so;
- A description of the right to receive the premium assistance and the conditions for entitlement; and
- If offered by the employer, a description of the option to enroll in a different coverage option available under the plan.
DOL has developed a model notice that an employer’s plan administrator may use to comply with ARP’s COBRA subsidy expiration notice requirements.
Employers should coordinate with their plan administrator to ensure compliance with this notice requirement.
This Special Bulletin is published for the benefit of the clients of Liebert Cassidy Whitmore. The information in this Special Bulletin should not be acted upon without professional advice.