• NEW LAW: Assistance-eligible individuals (AEIs) may receive a 100% subsidy for COBRA premiums for any period of COBRA coverage during the period beginning on April 1, 2021 (the first day of the first month beginning after enactment) and ending on September 30, 2021. (ARPA Sec. 9501(a))

    Eligibility: An AEI is a COBRA qualified beneficiary (i.e., employee, former employee, covered spouse, or covered dependent) who, with respect to a period of coverage during the period beginning on April 1, 2021, and ending on September 30, 2021, is eligible for and elects COBRA coverage due to a qualifying event of involuntary termination of employment or reduction of hours. (ARPA Sec. 9501(a)(3))

    Extended election period: Individuals who do not have a COBRA election in effect on April 1, 2021, but who would be an AEI if they did, are eligible for the subsidy. In addition, individuals who elected but discontinued COBRA coverage before April 1, 2021, are eligible if they would otherwise be an AEI and are still within their maximum period of coverage. Individuals meeting these criteria may make a COBRA election during the period beginning on April 1, 2021, and ending 60 days after they are provided required notification of the extended election period. (ARPA Sec. 9501(a)(4)(A))

    COBRA coverage elected during the extended election period will commence with the first period of coverage beginning on or after April 1, 2021, and may not extend beyond the AEI’s original maximum period of coverage. (ARPA Sec. 9501(a)(4))

    Duration: The subsidy is available for any period of coverage during the period beginning on April 1, 2021, and ending on September 30, 2021. (ARPA Sec. 9501(a)(1)(A))

    However, eligibility may end earlier if the qualified beneficiary’s maximum period of coverage ends before September 30, 2021, or if the qualified beneficiary becomes eligible for coverage under another group health plan (other than coverage consisting of only excepted benefits, or coverage under a health flexible spending arrangement or qualified small employer health reimbursement arrangement) or Medicare. (ARPA Sec. 9501(a)(2)(A))

    Plan enrollment option: Group health plan sponsors may, but are not required to, allow AEIs to elect to enroll in different coverage. Enrollment must occur within 90 days after the date of notice informing the individual of the enrollment option. Enrollment in different coverage may be permitted only if:

    1. the premium does not exceed the premium for the coverage in which the individual was enrolled at the time of the qualifying event;
    2. the different coverage is also offered to similarly situated active employees at the time of the election; and
    3. the different coverage is not coverage that provides only excepted benefits, or is a qualified small employer health reimbursement arrangement or health flexible spending arrangement. (ARPA Sec. 9501(a)(1)(B))

    Notices from individuals to group health plan:  AEIs must notify the group health plan if they cease to be eligible for the subsidy because they become eligible for another group health plan or Medicare. Notices must be provided in the time and manner specified by the Department of Labor. (ARPA Sec. 9501(a)(2)(B))

    Penalties of $250 (or more for intentional failures) may be assessed for failure to provide such notification. No penalties will be assessed for failures due to reasonable cause and not to willful neglect. ( Code Sec. 6720C , as added by ARPA Sec. 9501(b)(2)(A))

    Required notices to AEIs: Group health plans must provide the following notices to AEIs:

    1. Notice of assistance availability. Informs AEIs of the availability of the subsidy and the option to enroll in different coverage (if permitted by the employer). Must be provided to individuals who become eligible to elect COBRA during the period beginning on April 1, 2021, and ending on September 30, 2021. This notice requirement may be met by amending existing notices or including a separate document along with them. Specific content requirements apply. (ARPA Sec. 9501(a)(5)(A) and (B))
    2. Notice of extended election period. Must be provided to individuals eligible for an extended election period within 60 days after April 1, 2021. (ARPA Sec. 9501(a)(5)(C))
    3. Notice of expiration of subsidy. Must be provided between 45 and 15 days before the date on which an individual’s subsidy will expire, unless the subsidy is expiring because the individual has gained eligibility for coverage under another group health plan or Medicare. (ARPA Sec. 9501(a)(6))

    Provision of these notices is required to meet COBRA’s notice requirements under Code Sec. 4980B(f)(6) , ERISA §606(a) , and PHSA Sec. 2206.

    Model notices. Within 30 days of enactment, the Department of Labor is to issue model notices which can be used to notify eligible individuals of the availability of assistance and the availability of an extended enrollment period. (ARPA Sec. 9501(a)(5)(D)) Within 45 days, the Department is to issue model notices regarding the expiration of the subsidy. (ARPA Sec. 9501(a)(6)(D))

    Refundable tax credit: Employers will be allowed a quarterly tax credit against the Medicare payroll tax equal to the premium amounts not paid by AEIs. If the credit amount exceeds the quarterly Medicare payroll tax, the excess will be treated as an overpayment refundable under Code Sec. 6402(a) and Code Sec. 6413(b) . The quarterly credit may be paid in advance according to forms and instructions to be provided by the Department of Labor. ( Code Sec. 6432 , as added by ARPA Sec. 9501(b)(1)(A))

    Coordination with HCTC: Effective for tax years ending after the date of enactment, AEIs are not eligible for the health coverage tax credit (HCTC) under Code Sec. 35(g) for any period of coverage in which they receive a COBRA subsidy. ( Code Sec. 35(g)(9) , as amended by ARPA Sec. 9501(b)(3))

    Exclusion from income:  Effective for tax years ending after the date of enactment, subsidy amounts will not be included in the gross income of AEIs. ( Code Sec. 139I , as added by ARPA Sec. 9501(b)(4))

    Regulations and outreach: The Department of Labor, Treasury, and Health and Human Services may issue regulations as necessary or appropriate to carry out the provisions of the Act. (ARPA Sec. 9501(a)(7); Code Sec. 6432(g) , as added by ARPA Sec. 9501(b)(1)(A)) The agencies are to provide public education and enrollment assistance to individuals, employers, plans, and other entities as appropriate. (ARPA Sec. 9501(a)(8))

    Effective date. The addition of Code Sec. 6432  applies to premiums to which Code Sec. 6432(a)(1)(A) applies and wages paid on or after April 1, 2021. (ARPA Sec. 9501(b)(1)(C)) The amendment to Code Sec. 35(g)(9) applies to tax years ending after the date of the enactment of ARPA. (ARPA Sec. 9501(b)(3)(B)) The addition of  Code Sec. 139I  applies to tax years ending after the date of the enactment of ARPA. (ARPA Sec. 9501(b)(4)(C))

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