Many employers are aware that the American Rescue Plan Act (the “ARPA”) includes a 100% temporary COBRA subsidy for eligible individuals who lost health care coverage due to an “involuntary termination of employment” or a “reduction in hours.” The ARPA COBRA subsidy was enacted to cover certain eligible employees (often termed “Assistance Eligible Individuals”) from April 1, 2021 to September 30, 2021. Although this new subsidy may go a long way to support individuals who lose jobs or hours due to economic stagnation triggered by the pandemic, the ARPA has caused more than one headache for employers.
On April 7, 2021, the U.S. Department of Labor (“DOL”) issued highly anticipated guidance in the form of “FAQs,” covering COBRA eligibility, model ARPA COBRA notices and model election forms. The deadline for providing notice to Assistance Eligible Individuals who previously incurred an involuntary termination of employment or a reduction in hours COBRA qualifying event is May 31, 2021. Here’s what you need to know:
Who do I send this notice to?
Employers must provide a notice of a special COBRA election for Assistance Eligible Individuals who incurred an involuntary termination of employment or a reduction in hours prior to April 1, 2021 and whose maximum COBRA election period (this is typically 18 months) has not expired. This generally means that a “qualifying event” would have occurred prior to October 1, 2019.
Why do I have to provide this notice by May 31, 2021?
The deadline to provide this notice is May 31, 2021 because that date is 60 days from the April 1, 2021 start date for premium assistance. Please also note that the DOL has clarified that the COBRA subsidy notice and election deadlines are not impacted by the time extensions previously issued by the IRS, Department of Treasury, and the DOL for certain other actions related to health coverage under private-sector, employment-based group health plans.
What do I need to provide?
You do not need to reinvent the wheel. Luckily, the DOL has developed model notices that are available at https://www.dol.gov/cobra-subsidy.
Is this the only notice requirement I need to be aware of?
No. In addition to the notice described above, the ARPA creates the following other notice requirements:
(1) General notice of COBRA premium assistance to Assistance Eligible Individuals who incur an involuntary termination of employment or a reduction in hours between April 1, 2021 and September 30, 2021; and
(2) Notice of expiration of COBRA premium assistance, including advance notice of when premium assistance will expire, expiration date, and eligibility for continued COBRA coverage paid by the COBRA beneficiary. Note: this notice must be provided 15-45 days before the individual’s premium assistance expires.
What if I don’t send out the notices?
Employers may be subject to excise taxes for failing to satisfy COBRA continuation requirements. This tax could be as much as $100 per Assistance Eligible Individual, but not more than $200 per family, for each day that the employer is in violation of the COBRA rules.
The DOL FAQs are a great place to start when it comes to the new COBRA continuation requirements under ARPA. If you have any additional questions, or any questions about how the ARPA impacts your business, please do not hesitate to reach out to the employment law team at Skelton, Taintor & Abbott.