The American Rescue Plan Act of 2021 (ARPA) was signed into law last month and became effective April 1, 2021. As Benefit Innovations previously shared, the ARPA includes a 100% COBRA subsidy for six months and a voluntary increase to the dependent care FSA contribution limit for the 2021 plan year.
As with any major legislative update, Benefit Innovations has communicated the key changes and next steps with our clients and partners. We also understand that any change of this size will generate ongoing questions.
COBRA PREMIUM SUBSIDY – American Rescue Plan Act (ARPA), signed into law by President Biden. The law contains provisions that impact a new COBRA subsidy. The America Rescue Plan Act provides a temporary subsidy for COBRA continuation premiums under the group health plans. COBRA is a federal Law, that applies to employers with 20 or more employees. The most important provisions include:
The 100% subsidy applies to employees and their dependents – Qualifying Beneficiaries, who have been involuntarily terminated or had an involuntary reduction of work hours.
The temporary subsidy includes COBRA premiums from April 1, 2021 through September 30, 2021.
The COBRA subsidy is not available for employees who voluntarily end employment or become eligible for group health coverage elsewhere (i.e. Spouse/partners group plan/Employers group plan/Medicare).
Qualifying Beneficiaries who originally declined COBRA or originally elected COBRA and then dropped it are eligible to re-elect COBRA and the subsidy if their original COBRA continuation period has not been exhausted. This provision is viewed as employees that had an involuntary termination as of November 1, 2019, are eligible to elect the COBRA subsidy beginning April 1, 2021 for no more than their 18 months of COBRA eligibility. Qualifying Beneficiaries will have 60 days from the date of notice to elect/re-elect the COBRA subsidy. The Outbreak Period (pandemic) suspended the initial COBRA 60-day election period to 60 days after the Outbreak period has been removed.
Qualifying Beneficiaries Penalties: Willfully Neglect Penalty $250, Intentional Failure Penalty $250 or 110% of the premiums paid after eligibility.
Employers will receive a refundable Medicare payroll tax for providing the COBRA subsidy. If the tax credit is more than the payroll taxes the IRS will issue a refund check.
COBRA Subsidy includes the 2% administrative fee. Employers will be subject to remit the 2% administrative fee to the Plan Administrator (Benefit Innovations).
ARPA does not extend the COBRA continuation period. The initial qualifying event loss of coverage date still applies.
Employers has the option of allowing COBRA qualified beneficiaries to elect a less expensive group health plan option.
The COBRA subsidy is not taxable income to the Qualifying Beneficiary.
Employers/Plan Administrators must notify Qualifying Beneficiaries described above regarding the election of COBRA continuation and the premium subsidy. (Benefit Innovations will assist with this notification)
Notifications to Qualifying Beneficiaries: Election Notice, Information Notice and Expiration Notice.
The DOL will release the Model Notification on April 10, 2021.
The DOL will be releasing further guidance on the many unanswered details surrounding the COBRA Subsidy.
Putting It Together Upon the DOL’s decision, Benefit Innovations:
Will send the Employer a list of Qualifying Beneficiaries, the Employer will need to identify which qualifying beneficiaries were involuntarily terminated and return this information to Benefit Innovations.
Will then send those Qualifying Beneficences the DOL required notices.
Upon a Qualifying Beneficiaries election, they will be enrolled in the employers group plan.
Will send the employer an election and premium notice (includes the administrative fee) and the administrative fee invoice. The premium notice will be the amount to be deducted from the payroll tax, the administrative invoice will be payable to Benefit Innovations.
If you have further questions on the COBRA subsidy, please contact Deb Holthaus at 320-632- 2857. In the meantime, we are awaiting the DOL’s model notices and software updates. We will be in contact very shortly with your company’s Qualifying Beneficiary information.
Kind Regards, Deb