On April 1, 2021, President Biden signed into law the American Rescue Plan Act of 2021 which created a 100% employer-paid subsidy for COBRA coverage premiums from April 1st through September 30, 2021.
As you may know, COBRA requires that private employers with 20 or more employees with employer-sponsored group health plans to provide eligible individuals with continuing health care coverage after an involuntary termination or reduction in hours. Some states, including Massachusetts and New Hampshire, have mini-COBRA statutes that require employers of 19 or less employees with such health plans to also provide continuing coverage. On April 1, 2021, President Biden signed into law the American Rescue Plan Act of 2021 which created a 100% employer-paid subsidy for COBRA coverage premiums from April 1st through September 30, 2021.
While COBRA continuing benefits are normally an expense paid by the employee, the Act requires employer payment of continuing health care coverage to eligible employees for the above-referenced time period. An eligible individual is one who is a COBRA-qualified beneficiary and eligible for COBRA continuing coverage due to an involuntary termination or reduction in hours, so long as the termination was not for “gross misconduct.”
The ARPA also applies to employers in states with mini-COBRA statutes (Massachusetts and New Hampshire!). See American Recovery Plan, Public Law 117-2, Section 9501(a)(9)(B). Employees who previously did not elect COBRA coverage, or who may have dropped coverage may enroll or re-enroll. This subsidy will cover an employee’s medical, dental and vision plans, but not certain other plan.
Employers will obtain reimbursement for this subsidy payment through a payroll tax credit, but how this will occur has not yet been detailed in the available guidance. This COBRA premium assistance applies to “all group health plans sponsored by private-sector employers or employee organizations (unions) subject to COBRA Rules under the Employee Retirement Income Security Act of 1974 (ERISA). They also apply to plans sponsored by State or local governments subject to the continuation provisions under the Public Health Service Act. See U.S. Department of Labor.
The Act also requires employers to provide written notices to employees:
Employers may be subject to excise taxes for failing to satisfy the COBRA continuation requirements and it could be as much as $100 per day per qualified beneficiary, but no more than $200 per day per family for each day that the employer violates COBRA regulations. Model notices issued by the Department of Labor may be obtained at https://www.dol.gov/agencies/ebsa/laws-and-regulations/laws/cobra/premium-subsidy.
https://www.dol.gov/sites/dolgov/files/EBSA/about-ebsa/our-activities/resource-center/faqs/cobra-continuation-health-coverage-for-employers.pdf where it has published frequently asked questions that offer some guidance. For other questions on how this will impact your business, please contact Pomeroy Law P.C. at 978-358-7550.