On April 7th, the Department of Labor (DOL) issued model notices, FAQs, and other materials related to the COBRA premium assistance program that took effect on April 1st as a result of the American Rescue Plan Act (ARPA). All DOL materials are available on a dedicated website. Employers need to work with their COBRA service providers to provide the model notices as soon as possible.
The subsidy – which pays 100% of COBRA premiums -- is available from April 1st to September 30th to assistance eligible individuals (AEIs). An AEI is a qualified beneficiary who lost group health plan coverage (other than health FSA benefits) due to reduction of hours or involuntary termination of employment and whose original maximum COBRA coverage period overlaps the COBRA subsidy period by at least one month.
The FAQs clarify some issues, including:
- Outbreak Period. This extended deadline relief does not apply to the second election right available to AEIs not currently enrolled in COBRA.
- Independent Election Rights. Each AEI has a separate right to elect the COBRA subsidy.
- Gross Misconduct. If employment termination was for gross misconduct, the employee and any dependents would not qualify for COBRA or the subsidy.
- Reduction of Hours. A reduction of hours includes, for example, reduced hours due to a change in a business’s hours of operations, a change from full-time to part-time status, taking of a temporary leave of absence, or an individual’s participation in a lawful labor strike, as long as the individual remains an employee at the time that hours are reduced.
- Public Exchange Coverage. AEIs currently enrolled in coverage through the public exchanges may switch to subsidized COBRA coverage. Coverage terminations on the public exchanges are typically prospective. Taxpayers with both subsidized COBRA and a premium tax credit for public exchange coverage for the same month will have to repay the premium tax credit with their individual tax return for the 2021 tax year.
Four model notices were included:
- Model ARP General Notice and COBRA Continuation Coverage Election Notice. This must be used for qualifying events that occur during the COBRA subsidy period (April 1 to Sept. 30). This notice may be provided separately or with the COBRA election notice following a COBRA qualifying event.
- Model Notice in Connection with Extended Election Period. This must be sent no later than May 31, 2021 to all AEIs who had a qualifying event before April 1, 2021. Plans don’t need to send this Notice to individuals whose maximum COBRA continuation coverage period, if COBRA had been elected or not discontinued, would have ended before April 1, 2021 (generally, those with applicable qualifying events before October 1, 2019).
- Model Notice of Expiration of Premium Assistance. This must be sent in the August 16th – September 15th timeframe to AEIs whose COBRA subsidy will expire on September 30th.
- Model Alternative Notice. This must be sent to AEIs of employers who are not subject to federal COBRA but instead are subject to state continuation requirements. Examples include small employers and some church plans.
A detailed GRIST analysis will soon be available on Mercer’s Law & Policy Group – Our Thinking page.
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