March 26, 2021

Since the American Rescue Plan Act of 2021 (ARPA) was enacted on March 11, 2021, there has been much discussion about various provisions of the sweeping Act, focusing primarily on a new round of stimulus checks, expansion of the Paycheck Protection Program (PPP) loan program and extension of the Employee Retention Credit (ERC), among others. One provision that has not received as much attention is the ARPA COBRA Premium Subsidy Program, and employers that sponsor group health plans subject to COBRA are reminded that this program takes effect April 1, 2021.

Employers might remember a similar program under the American Recovery and Reinvestment Act of 2009 that subsidized COBRA premiums up to 65%. The ARPA program is similar, but subsidizes COBRA premiums at a rate of 100% from April 1, 2021, through September 30, 2021 (Covered Period). The subsidy is available for “Assistance Eligible Individuals” (AEI). An AEI is a group health plan COBRA qualified beneficiary (COBRA Qualified Beneficiary) due to involuntary termination from employment or reduction in hours during the Covered Period. Importantly, COBRA Qualified Beneficiaries that previously experienced involuntary termination or reduction in hours before April 1 and had not elected COBRA, or elected COBRA but discontinued it prior to April 1, 2021 (Extended Qualified Beneficiaries), are also eligible for COBRA premium assistance. The employer will be responsible for paying the AEI’s COBRA premium during the Covered Period and can then claim a credit against payroll tax for the amounts paid.

The ARPA COBRA Premium Subsidy Program contains several notice requirements. Extended Qualified Beneficiaries must be provided notice of their eligibility and that COBRA premium assistance must be elected beginning April 1, 2021, and ending 60 days after notice is provided. The U.S. Department of Labor is to provide model notices no later than April 10 and such notices must be provided to Extended Qualified Beneficiaries by May 31, 2021. Additionally, plan participants that become eligible for COBRA due to involuntary termination or reduction of hours during the Covered Period must be provided, in conjunction with or in addition to standard COBRA notice, clear written notice that includes:

• Premium assistance availability for AEIs
• Forms required to establish premium assistance eligibility
• Contact information for plan administrator with respect to questions regarding premium assistance
• A description of the extended election period
• Obligations to notify the group health plan of the AEI’s eligibility for Medicare or other group health plan coverage and penalties for failure to do so
• Description of option to enroll in different plans if employer elects to allow it

A Premium Assistance Expiration Notice is also required prior to the expiration of assistance. While the model notices have not yet been issued and there is some time for group health plan sponsors to prepare for these new requirements, employers would be well served to review records now to determine what employees might be deemed AEIs that should receive notices.

For more information on the ARPA COBRA Premium Subsidy Program, please contact Scopelitis Partner Steve Pletcher.