The American Rescue Plan Act and COBRA

Allows government subsidies for COBRA premiums for six month period

The American Rescue Plan Act of 2021 (ARPA) which was signed into law by Congress March 10, 2021 contains a series of new provisions temporarily modifying COBRA. This ARPA provision allows Assistance Eligible Individuals (AEIs) who lost health coverage (including dental and vision coverage) due to their or their family member’s involuntary termination or reduction in hours to receive COBRA coverage with a premium reduction of 100% from April 1, 2021 through September 30, 2021.

The Department of Labor has until April 10th, 2021 to clarify the language of the law, such as the definition of “involuntarily terminated,” but there are certain actions which you, the employer, can take now to ensure your continued COBRA compliance. The purpose of this letter is to outline what we are working on and what we believe you, the employer needs to be doing to ensure your ongoing COBRA compliance.

HRPro’s Action Plan

As an employer, it is important that you identify who is and is not eligible for the subsidy. We will be sending all clients a report from our system known as the Qualifying Event Tracking Report by Type which will assist you in this process.

Employers will be required to:

Identify from the report which of these individuals were involuntarily terminated or had a reduction of hours and as such, may be considered Assistance Eligible Individuals (AEIs).

Determine whether you intend to allow a former employee to switch to alternative health coverage for COBRA purposes. If you offer more than one health plan to employees, would you be willing to offer AEIs the option to select the lower cost option if available?

If you currently pay some portion of COBRA premiums for certain qualifying individuals, the amount of the subsidy for which these participants are eligible will need to be carefully reviewed.

HRPro will take the following actions to ensure your COBRA compliance:

There is much work to be done in a short period of time. Be assured that we are doing everything we can to be prepared for the finalized guidance from the DOL and Treasury on 4/10/2021. We will be watching for these model notices and any technical changes to the Act that may arise. If you have any questions, please do not hesitate to contact us.

Generate the Qualifying Event Tracking Report and send it to you to help you identify who is and is not eligible for the COBRA subsidy.

Revise and update COBRA communications materials with a priority on creating a notice for those terminated employees immediately entitled to a new COBRA enrollment period. We have already modified the notices to those terminated employees and are only waiting for the last word from the DOL before finalizing them and making them available to you.

Coordinate with you in the determination of eligible individuals; we will then notify them of their new COBRA election period and of the availability of the premium subsidy and, if available, other COBRA coverage options.

Revise our systems and other procedures to reflect the 100% government subsidy of the COBRA premium for assistance-eligible individuals and reflect the revised charges on new remittance coupons to be sent to assistance-eligible individuals.

Determine, going forward, any participant premium overpayments and credit the payments to future premiums or return the overpayments directly to the participant, if required.

Develop processes, procedures, and system changes necessary to end the subsidy when the individual no longer is able to claim it and to reinstate the 102% COBRA premium charge if the individual continues to be eligible for COBRA after termination of the subsidy. 

Create a report for your use in receiving the appropriate tax credit on Form 941.

American Rescue Plan Act FAQs