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Department of Labor Questions Model COBRA Subsidy Notes and FAQs

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The Department of Labor (“DOL”) has issued sample notices on COBRA Premium Aid (a / k / a COBRA subsidies). As we have written here, under the American Rescue Plan Act of 2021 (“Act”), Congress attempted to give qualified persons – known under the law as “Assistance Eligible Individuals” or “AEIs” – the option to obtain health insurance continue by subsidizing their COBRA rewards payments for the period between April 1 and September 30, 2021. We discuss these reporting requirements and related issues below.

The COBRA Subsidy Notices

To freshen up, the new law requires employers to make various notices, including notices:

  1. For qualifying events occurring after April 1, 2021. Employers must notify any AEI that has a qualified event (e.g. involuntary termination or reduction in working hours) between April 1 and September 30, 2021, which informs the AEI, among other things, of the availability of the CORBA subsidy and whether the employer will allow the AEI to sign up for a different, cheaper cover. Employers can label this notice with the regular COBRA notice that the AEI would receive after a qualifying event, or they can provide it separately. Indeed, the model notice addresses both obligations by including the language of the subsidy notification in an updated general notice.
  2. For qualifying events that occur before April 1, 2021. Employers must notify this so-called “second chance” to every AEI who has experienced and is a COBRA qualification event after October 1, 2019, but before April 1, 2021 (and thus within its 18-month COBRA period) currently enrolled with COBRA Coverage or has refused to choose COBRA Coverage and has notified AEI that he has the option to enroll in COBRA Coverage despite the AEI’s earlier decision not to elect to be covered.
    Employers must submit this notification by May 31, 2021 at the latest.
  3. Before the subsidies expire. Employers must also provide AEI with a notice of the expiry date of the subsidy. Employers must provide this notice between 15 and 45 days prior to the expiration date. However, employers do not need to provide this notice when the subsidy ends as the AEI falls under a different group health plan or Medicare.

In particular, the model notices required by DOL include the following:

  • Model General Notice and COBRA Continuation Coverage Election Notice
    • This sample form is the standard COBRA redial notification that has been changed to reflect the law’s premium subsidies. It must be made available to Qualified Beneficiaries whose COBRA Qualification Event takes place on or on
      after this April 1, 2021.
  • Sample notice in connection with the extended electoral term
    • This sample form should be made available to AEIs who are currently enrolled in COBRA Continuing Insurance due to a reduction in working hours or involuntary termination, as well as to AEIs who would otherwise have qualified if they had chosen and / or retained COBRA Continuing Coverage . This notification must be sent by May 31, 2021 to AEIs that had a Qualifying Event prior to April 1, 2021.
  • Model alternative note
    • This sample form is used to select a mini-COBRA coverage under state law for which the law provides premium assistance.
  • Summary of the COBRA Reward Assistance Provisions under the American Rescue Plan Act of 2021 (including an “Application for Assisted Treatment” form)
    • The “summary” part of this announcement must appear in all three of the above notices: (i) the general announcement; (ii) the announcement relating to the extended term of office; and (iii) the pattern alternative. The “Inquiry” part enables individuals to request or hire premium assistance.

Next steps and takeaways

  • With the sample notifications now available, employers would be well advised to begin the notification process for affected employees by, among other things, reaching out to their COBRA providers and administrators to ensure that each AEI receives the appropriate notification. In particular, employers should not overlook those AEIs that are eligible for a “second chance” notification, which must be sent to them by May 31, 2021 at the latest.
  • AEIs have 60 days from the date they receive notification to sign up for COBRA coverage – not from the date of notification itself.
  • If an employer offers the AEI the opportunity to apply for a different, more cost-effective cover, the AEI have 90 days from the date on which they receive the notification to apply for the other cover.
  • From a mechanical point of view, AEIs do not pay any premiums during the support period. Instead, the employer or plan to which COBRA awards are payable is entitled to a tax credit for the amount of the grant. Therefore, employers should not send refunds or payments directly to the AEI. However, if an AEI may have paid a COBRA premium during the support period, employers should work with the AEI to initiate a credit or refund.
  • Employers should also pay close attention to how these subsidies may affect vacation, severance programs, or individual severance packages that include reimbursement of COBRA coverage or payments in return.
  • The FAQs published by DOL do not provide guidance on “involuntary termination”, but contain certain examples of qualifying events such as: B. a reduction in working hours, including “reduction in working hours due to a change in a company’s business hours”. A. Moving from full-time to part-time status, taking temporary vacation or participating in a lawful labor strike as long as the individual remains an employee at the time of the reduction in working hours. “Additional guidance on this issue would be welcome.
  • The FAQs also deal with the interaction of the rules previously issued by the IRS and the extension of the deadlines for COBRA elections by the DOL during the COVID-19 National Emergency, as well as the rules of the Reward Assistance Act. According to the FAQs, this extended deadline does not apply to the notice or election periods for the purposes of COBRA premium support under the law. Thus there are now two overlapping COBRA regimes – one for standard COBRA elections and the other for eligibility for bonus assistance. Additional guidance would also be appreciated to help understand how these rules are coordinated.
  • Employers should be aware that failure to comply with the notification requirements may result in an excise tax of US $ 100 per Qualifying Beneficiary or up to US $ 200 per family for each day the plan or employer violates COBRA rules.

The content of this article is intended to provide general guidance on the subject. A professional should be obtained about your particular circumstances.

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