On March 11, 2021, President Biden signed the American Rescue Plan Act
of 2021 (ARPA), yet another federal effort to address employment issues
related to the COVID-19 pandemic. Among other provisions, ARPA created
a 100 percent COBRA premium subsidy and additional COBRA enrollment rights
for certain employees (and their families) who lost group health plan
coverage due to an involuntary termination of employment or a reduction of hours.
From April 1, 2021 through September 30, 2021, group health plans providing
COBRA continuation coverage (or continuation coverage under state “mini-COBRA”
laws) must offer a 100 percent subsidy of COBRA premiums for “assistance
eligible individuals” (AEIs) and their qualified beneficiaries.
The subsidy requirement applies to major medical, dental and vision plans
offered by employers, but not health flexible spending accounts.
An individual is an AEI if they qualify for COBRA coverage due to an involuntary
termination of employment or reduction of hours. Individuals who qualify
for COBRA coverage due to other qualifying events, such as a voluntary
termination of employment, are not considered to be AEIs eligible for
the premium subsidy.
Individuals who do not have a COBRA election in effect on April 1, 2021,
but who would be AEIs if they did, are also eligible for the subsidy.
This means that individuals who experienced an involuntary termination
of employment or a reduction of hours so that COBRA would have started
sometime within the 18 months prior to April 1, 2021, but who did not
timely elect COBRA, may still elect subsidized COBRA coverage prospectively.
In addition, individuals who had elected COBRA coverage but discontinued
such coverage before April 1, 2021 are eligible to re-elect COBRA coverage
if they would otherwise be AEIs and are still within their COBRA 18-month
maximum coverage period.
The amount of the COBRA premium subsidy is not taxable to the AEI. The
premium amount is advanced by the employer or plan and will be reimbursed
by the federal government through a refundable credit against payroll
taxes. For self-insured plans and insured plans subject to federal COBRA,
the employer will receive the tax credit. For insured plans not subject
to COBRA, the insurer will receive the credit. Credit amounts exceeding
Medicare taxes will be treated as a refund of a Medicare tax overpayment.
here to read Mr. Hommel as quoted in the latest issue of Time Magazine.