Compliance News | April 9, 2021
On April 7, 2021, the Department of Labor released a series of documents implementing the temporary six-month COBRA subsidy. These documents will assist plan administrators in implementing the new law. They will also be helpful to plan participants who are seeking information about the subsidy and how to apply for it.
The American Rescue Plan (ARP) Act of 2021 includes a temporary six-month COBRA subsidy when group health plan coverage is lost due to reduction in hours or an involuntary termination. The subsidy first became available on April 1, 2021.
The subsidy will generally end on September 30, 2021. However, it will end earlier for individuals who become eligible for other group coverage or Medicare, or whose maximum period of COBRA coverage ends before September 30. We summarized the ARP Act’s COBRA subsidy in our March 11, 2021 insight.
The newly released documents include:
All of these documents are available on the DOL’s website.
The DOL website also includes FAQs that COBRA-qualified beneficiaries, including assistance eligible individuals, may ask.
For people eligible for the extended election opportunity, the plan administrator needs to provide the notice no later than May 31, 2021. In general, people who would have been eligible for COBRA starting in November 2019 will be entitled to an extended election opportunity if their qualifying event was reduction in hours or involuntary termination of employment. This is the case because their 18th month of COBRA is April 2021.
For people who are newly eligible to elect COBRA, plan administrators should follow the plan’s regular COBRA rules relating to distribution of the election notice.
Anyone applying for the subsidy is required to request the subsidy (and elect COBRA, if applicable) within 60 days of receipt of the either of the above notices. This 60-day deadline applies to all subsidy applications even if the individual would have additional time to elect COBRA under special rules in place during the COVID-19 national emergency.
While use of these model notices is not required, the DOL considers their use to be good-faith compliance with the content requirements, and encourages their use.
Plan administrators should carefully read the model notices. Two issues in particular may need special attention:
Additional guidance on the COBRA subsidy should be forthcoming from the Treasury Department and the IRS. It will address other issues concerning eligibility and how plans will receive the tax credit subsidy.
This page is for informational purposes only and does not constitute legal, tax or investment advice. You are encouraged to discuss the issues raised here with your legal, tax and other advisors before determining how the issues apply to your specific situations.
Don't miss out. Join 16,000 others who already get the latest insights from Segal.