On March 11, 2021, the American Rescue Plan Act of 2021 (ARP) was signed into law. Included in the Act is a temporary 100% COBRA subsidy for COBRA qualified beneficiaries where the qualifying event was an involuntary termination of employment or reduction in hours.
- The subsidy will begin for coverage periods starting on April 1, 2021 and ending on September 30, 2021. The subsidy would end sooner if the qualified beneficiary’s maximum COBRA coverage period ends or if the individual is eligible for another group health plan or Medicare.
- The subsidy applies to all plans subject to COBRA (medical, dental, vision, etc.)
- The premium plus 2% administration fee is initially “advanced” by the employer or plan for fully insured or self-funded plans, then the employer applies for the tax credit to be reimbursed by the government.
- The Act also provides additional enrollment options for individuals who already had an involuntary termination of employment or reduction in hours within the last 18 months and did not timely elect COBRA or dropped COBRA. These individuals have a new 60-day election period following the date that they receive a new required COBRA notice.
- The Act requires employers to update COBRA *notices sent to assistance eligible individuals to describe the subsidy and to issue extended COBRA election notices within 60 days of the date of applicability. Failure to do so is treated as a failure of the COBRA notice requirements. Employers also must provide a notice of expiration before the premium subsidy expires. The Department of Labor will issue model notices.
*Notices:
- The Department of Labor (DOL) is required to issue Model Notice by April 10, 2021 and
- Employers must provide notice to eligible individuals by May 31, 2021