On April 7, 2021, the U.S. Department of Labor issued FAQs and five model notices for the COBRA premium subsidy provided by the American Rescue Plan Act (ARPA), which we discussed in our March 16, 2021 E-lert.
A New COBRA Subsidy Until September 30, 2021 for Involuntary Terminations. The ARPA provides a 100% subsidy for COBRA continuation coverage premiums from April 1, 2021 through September 30, 2021 for individuals who lost group health plan coverage due to an involuntary termination of employment or reduction in hours, and who elect COBRA during the subsidy period. The subsidy period began April 1, 2021 and ends September 30, 2021. The DOL’s FAQs make clear that the subsidy period does not expand an individual’s COBRA coverage period.
What is an Involuntary Termination? Notably, the FAQs do not explain what constitutes an “involuntary termination” to qualify for the subsidy. However, the FAQs do provide examples of “reductions in hours” that may qualify for the subsidy, including “reduced hours due to 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.”
Reimbursable to the Employer. The FAQs also make clear that individuals who qualify for the subsidy do not have to pay any of the COBRA premium for the period of coverage from April 1, 2021 through September 30, 2021. Moreover, the “premium is reimbursed directly to the employer, plan administrator, or insurance company through a COBRA premium assistance credit.”
The Model Notices. Employers are required to ensure that their plan administrators provide certain notices to eligible employees. The DOL provided five model notices to assist employers and their plan administrators in complying with the new mandate. The model notices are:
The plan administrator should send this model notice to any individual who loses coverage due to an involuntary termination of employment or reduction in hours between April 1, 2021 and September 30, 2021. This model notice includes information about the COBRA subsidy and the standard election notice.
The plan administrator should send this model notice to any individual currently enrolled in COBRA continuation coverage due to an involuntary termination of employment or reduction in hours, and to individuals who lost health coverage due to an involuntary termination of employment or reduction in hours on or after October 1, 2019, but did not elect COBRA or let their COBRA lapse.
This notice must be provided to eligible individuals before May 31, 2021, and individuals have 60 days after the notice is provided to elect COBRA.
This model notice should be sent by the plan administrator to any individuals who may qualify for the subsidy under state continuation coverage laws.
The plan administrator should include the “Summary of the COBRA Premium Assistance Provisions under the American Rescue Plan Act of 2021” when distributing the above-mentioned model notices. This document contains information on the ARPA and forms to elect or discontinue the premium assistance.
The plan administrator should send this model notice to individuals 15 to 45 days before their premium assistance expires.
This is obviously a fast-moving and ever-changing situation, and we will continue to send out E-lerts on any significant developments. You may also wish to check our continually-updated FAQs frequently.