The IRS issued Notice 2021-31 to give instructions and clarification on the COBRA subsidy (“premium assistance”) under the American Rescue Plan Act (ARPA). The subsidies are funded through a payroll tax credit and cover an individual’s cost of COBRA or mini-COBRA premiums from April 1, 2021 through Sept. 30, 2021. It applies to “Assistance Eligible Individuals” (AEIs) – employees and their family members, who meet certain conditions, including a loss of health coverage (other than a Health FSA) due to a reduction in hours or involuntary termination of employment.
The Notice discusses the background of the subsidy and includes 86 questions and answers (Q&As) about its application, in the following categories:
- Eligibility for COBRA premium assistance (Q&A 1-20)
- Reduction in hours (Q&A 21-23)
- Involuntary termination of employment (Q&A 24-34)
- Coverage eligible for COBRA premium assistance (Q&A 35-42)
- Beginning and end of COBRA premium assistance period (Q&A 43-50)
- Extended election period (Q&A 51-55)
- Extensions under the Emergency Relief Notices (Q&A 56-59)
- Payments to insurers under federal COBRA (Q&A 60)
- Comparable state continuation coverage (Q&A 61-62)
- Calculating and claiming the COBRA premium assistance credit (Q&A 63-86)
Of particular interest to employers, the FAQs provide information on what qualifies as an “involuntary” termination of employment for subsidy purposes. See bulletin below for a summary of that guidance.
As a reminder, employers must familiarize themselves with the subsidy requirements, including sending the COBRA subsidy notices (available on the DOL website) starting now, if not already.
If you have questions or need help, please contact one of our benefit consultants.
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