DOL issues guidelines on government funded COBRA premium subsidy – FAQs and sample notices provide clarity for employers
June 17, 2021
Troutman Pepper Hamilton Sanders
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Q: Has the Department of Labor (DOL) issued guidelines on the COBRA Premium Grant?
A: On March 25th, we reported on the 100% government funded COBRA Premium Subsidy, which is included in the American Rescue Plan Act (ARPA), and determined that additional guidance is needed on a number of issues. See “COVID-19 HR Professional Resource Guide: 100% Federal Funded COBRA Is Almost There – What You Need To Know.” In response to questions from stakeholders, the Department of Labor (DOL) issued FAQs on April 7th containing much-needed guidance on the COBRA Premium Subsidy. While the FAQs provide some clarity for employers about how to implement and manage the COBRA Premium Grant, additional guidance is needed.
The ARPA COBRA premium subsidy provisions require employers and insurers to subsidize 100% of the premiums otherwise owed for COBRA cover in the period from April 1, 2021 to September 30, 2021 (funding period). An AEI is a qualified beneficiary whose COBRA Qualifying Event is involuntary termination or a reduction in working hours who is otherwise not eligible for Medicare or any other group health insurance and who actually selects COBRA insurance. The FAQs confirm the following aspects of the ARPA COBRA premium grant available to AIAs:
- The COBRA Premium Grant applies to group health insurances that are required to provide continuous coverage under state mini-COBRA laws.
- AEI does not include individuals terminated for gross misconduct, individuals eligible for group health coverage through Medicare or a new employer or spouse plan (other than an optional benefit plan, a qualified small employer health plan, or a health insurance plan with flexible expenses). .
- Prior government guidance extending the deadline for choosing COBRA coverage by up to one year during the COVID-19 outbreak period does not apply to the additional 60-day COBRA option available to potential AEIs currently did not receive COBRA coverage. This means that the post-election period runs for 60 days and only 60 days after the post-election notification has been sent. Potential AEIs must choose COBRA continuation coverage or lose their right to choose subsidized COBRA continuation coverage within this 60-day election period.
- If the qualifying event of a prospective AEI occurred before April 1, 2021, the election period for subsidized COBRA continuation coverage does not invalidate the AEI’s right to elect COBRA continuation coverage from the previous qualifying event, including during the COVID- 19 outbreak time.
- Potential AEI’s can use the additional election period to switch from an individual market health insurance to a subsidized COBRA continuation insurance.
- Potential AEOI’s have the flexibility to choose the effective date of COBRA coverage. Specifically, prospective AEOI can begin their coverage prospectively from the date of their choice, or if the qualifying event of a potential AEI occurred before April 1, 2021, the potential AEI can begin COBRA coverage on April 1, 2021, even if he / she receives an election notification and makes this election after April 1, 2021.
- The additional option does not extend the duration of COBRA coverage – a prospective AEI who selects COBRA coverage during the additional option will be eligible for COBRA coverage for up to 18 months after the qualifying event date.
- By enrolling in Subsidized COBRA Coverage, AEIs will not be eligible for any Premium Tax Credit (or any prepayments of Premium Tax Credit) for the Affordable Care Act Marketplace coverage otherwise available during this period.
- When the funding period ends, AEIs can qualify for a special membership period in order to register for insurance coverage via the marketplace or an individual market health insurance outside the marketplace.
- Employers who do not meet the COBRA requirements for the COBRA Reward Grant may incur an excise tax of up to $ 100 per qualified beneficiary, but no more than $ 200 per family, for each day the employer violates the COBRA requirements , subject.
To further help employers, DOL has created the “COBRA Premium Grant” website, which centralizes information about the COBRA Premium Grant and contains sample references. Unless expressly changed by the ARPA, the existing requirements for the time and type of delivery of COBRA messages continue to apply. However, prior government guidance extending the deadline for providing COBRA communications and holding COBRA elections by up to one year during the COVID-19 outbreak period does not apply to communications or election periods related to the ARPA COBRA -Premium subsidy.
- The Sample ARPA General Notice and COBRA Continuation Protection Election Notice, which should be used for all qualifying events from April 1, 2021 through September 30, 2021, notifies the recipient of the availability of the ARPA COBRA award grant and includes a COBRA coverage election form.
- The Sample COBRA continuation insurance notice in connection with extended election periods May 2021 be made available to all potential AEOI who are currently not receiving COBRA coverage and whose maximum COBRA coverage period has not yet expired.
- The sample alternatives to the ARPA Continuation Coverage Election Notice, which should be used in lieu of the above notices from group health insurers that are subject to state continuation requirements (i.e., state mini-COBRA laws), should be made available by May 31, 2021 to potential AEIs who are not currently in coverage and theirs maximum COBRA coverage period has not yet expired and for all qualifying events that take place from April 1, 2021 to September 30, 2021.
- Sample notification about the expiry of the period of the premium aid, which should be made available 15 to 45 days before the expiry of the COBRA premium grant, informs the AEI of the expiry of its COBRA premium grant.
- The summary of the COBRA Premium Assistance provisions under the American Rescue Plan Act of 2021
Provides individuals with a summary of the ARPA COBRA Reward Grant and includes forms that individuals who believe they are AIA can use to notify their employer (or former employer), as well as forms to support the COBRA non-compliance plan -Premium to inform grant because of entitlement to other coverage. This summary and associated forms should be included when sending any of the first three communications listed above to individuals.
Despite the welcome additional information and sample notes, employers continue to strive to obtain clarity about open content-related questions, for example whether a termination for an important reason is deemed to be an involuntary termination worthy of funding, whether existing subsidized COBRA obligations (e.g. due to separation agreements)) removed during the eligibility period and whether the aid is available to AEI’s whose maximum COBRA coverage period overlaps the eligibility period due to a second qualifying event. In addition, the IRS has not yet issued guidelines detailing how to obtain the federal tax credit that will be used to reimburse the cost of these COBRA subsidies. We hope to receive additional guidance from the federal authorities on these and other open questions soon.
If you have any questions or need assistance, please reach out to a member of the Troutman Pepper Employee Benefits and Executive Compensation Practice Group or the COVID-19 Response Task Force. We are here to help you in any way we can. This warning reflects the guidelines dated April 15, 2021.
Originally published on 04/22/2021.
The content of this article is intended to provide general guidance on the subject. You should seek expert advice regarding your specific circumstances.
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