Clarification of IRS Notice 221-31 and COBRA Subsidy Eligibility
On Tuesday May 19, IRS released Notice 2021-31. This notice provides a series of questions and answers to address many issues that have arisen with respect to COBRA premium assistance available for COBRA continuation coverage under the American Rescue Plan Act (ARP). Generally, the questions and answers apply for purposes of all COBRA continuation coverage requirements under the ARP, that is, both Federal COBRA and comparable State mini-COBRA requirements. If a question or answer or a particular part of an answer is applicable only to Federal COBRA, that discussion refers specifically to Federal COBRA. COBRA premium assistance requirements apply to the employer or plan sponsor, group health plan, or issuer, depending on the facts and circumstances.
The following discussion reviews the important answers to the questions.
ELIGIBILITY FOR COBRA PREMIUM ASSISTANCE
- Assistance Eligible Individuals includes spouse and other dependents: An Assistance Eligible Individual includes qualified beneficiaries who are the spouse or dependent child of the employee who had the reduction in hours or involuntary termination of employment resulting in a loss of coverage, as well as the employee, if that reduction in hours or involuntary termination of employment caused the qualified beneficiary to lose coverage and the other requirements are satisfied.
- The Requirements to be considered a Qualified Beneficiary: In order to be a qualified beneficiary who is eligible to become an Assistance Eligible Individual, an individual must (1) be covered under the group health plan on the day before the reduction in hours or involuntary termination of the covered employee’s employment, and (2) lose eligibility for the coverage due to the reduction in hours or involuntary termination of the covered employee’s employment. An individual who loses group health coverage in connection with the termination of a covered employee’s employment by reason of the employee’s gross misconduct is not a qualified beneficiary and, thus, cannot be an Assistance Eligible Individual.
- An individual can be an Assistance Eligible Individual many times: An individual who becomes a qualified beneficiary as the result of a reduction in hours or involuntary termination of employment, and who otherwise meets the requirements to be an Assistance Eligible Individual, is treated as an Assistance Eligible Individual regardless of whether the individual was also treated as an Assistance Eligible Individual at an earlier date.
- The First qualifying event must a reduction of hours or involuntary termination to qualify: Qualifying events other than a reduction in hours or an involuntary termination of employment, such as divorce or a covered dependent child ceasing to be a dependent child under the generally applicable terms of the plan (such as loss of dependent status due to aging out of eligibility), are not events qualifying an individual for COBRA premium assistance.
- When the COBRA premium assistance ends: COBRA premium assistance is available to a potential Assistance Eligible Individual until the individual is permitted to enroll in coverage under any other group health plan (including during a waiting period for any other plan).
- Enrollment in Coverage before electing COBRA does not end COBRA premium assistance eligibility: Enrollment in other group health plan coverage before electing COBRA continuation coverage does not end the period of eligibility for COBRA continuation coverage. If the individual is no longer covered by (or eligible to enroll in) the other group health plan coverage as of April 1, 2021, that prior coverage by a group health plan does not disqualify the individual from COBRA premium assistance. However, beginning on April 1, 2021, coverage by (or eligibility to enroll in) another group health plan would disqualify the individual from COBRA premium assistance, even though it does not end the period of eligibility for COBRA continuation coverage.
- The loss of coverage must result from a reduction of hours or involuntary termination to be eligible: If COBRA continuation coverage is based on a qualifying event other than a reduction in hours or involuntary termination of employment, the later reduction in hours or involuntary termination of employment of the employee does not cause a loss of coverage, and the qualified beneficiary therefore does not become a potential Assistance Eligible Individual.
- A second qualifying event can extend COBRA coverage: If the original qualifying event was a reduction in hours or an involuntary termination of employment, CBRA premium assistance is available to individuals who have elected and remained on COBRA continuation coverage for an extended period due to a disability determination, second qualifying event, or an extension under State mini-COBRA, to the extent the additional periods of coverage fall between April 1, 2021, and September 30, 2021.
For a full explanation of ARPA COBRA Subsidy eligibility and explanation of IRS Notice 221-31 download the flyer HERE.