ARPA COBRA Requirements
In our last bulletin, we discussed the American Rescue Plan Act’s (ARPA) continuation of paid sick and family leave tax credits under the FFCRA. There is another provision of ARPA however that applies to most employers – COBRA continuation coverage premium assistance.
Under the Consolidated Omnibus Budget Reconciliation Act (COBRA), most group health plans are required to provide continuation coverage to participants who experience qualifying events, most commonly loss of employment (except termination for gross misconduct) or a reduction of hours. Plans are allowed to charge up to 102% of the premium amount to participants for continued coverage, however.
Per ARPA, premium assistance will be available for COBRA continuation coverage from April 1, 2021 through September 30, 2021 for involuntary terminations or reductions in hours. This not only extends to participants who first become eligible for COBRA during this time period, but anyone eligible for such coverage during this time. That means, employers will potentially be required to issue notice of premium assistance eligibility to former employees who were terminated as far back as late 2019. Note that premium assistance is not available to those who become eligible for other employer group health coverage or Medicare.
New COBRA continuation coverage notices will have to be issued by employers and the United States Department of Labor (DOL) will be providing model notices next month. The new notices must be sent by employers by the end of May. Importantly, premium assistance will ultimately be borne by the federal government and employers will be given a tax credit for any premium assistance granted.
As you might sense, this is a complicated topic and much will be written regarding it in the weeks and months to come. The DOL is expected to issue guidance on this topic in the near future. In the meantime, work with your benefits provider and/or third party administrator regarding who is to receive notice as well as crafting the new notice.
Finally, if you typically provide COBRA continuation coverage benefits as part of your separation agreements, you will need to think through that to make sure your separation agreements are up to date and enforceable. COBRA continuation during this period cannot constitute consideration supporting a waiver and release of claims in your separation agreements because, per ARPA, employees are legally entitled to this coverage.
Be safe and stay the course. And of course, let us know if we can help.