New Model Notices and FAQs: Department of Labor Issues Guidance for COBRA Premium Assistance
From April 1, 2021 to September 30, 2021, the American Rescue Plan Act of 2021 (ARPA) requires employers and their group health plans to subsidize the applicable premium (including any administrative fees) for continuation coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) for certain “assistance eligible individuals”. The employers are then entitled to a tax credit for the amount of these COBRA subsidies.
The U.S. Department of Labor (DOL) issued much anticipated guidance (available here on the DOL website), as well as model notices (available here), on April 7, 2021. Particularly because employers have a short window of time to send the required notices and provide an additional election opportunity to certain of these individuals, we recommend that employers work with their legal counsel, COBRA administrators (if any) and internal benefits and human resources team as soon as possible to meet the applicable deadlines for compliance.
Assistance Eligible Individuals
Under ARPA, the “assistance eligible individuals” who may receive the COBRA subsidies are the individuals who have a qualifying event under COBRA due to an involuntary termination of employment (without gross misconduct) or a reduction of hours. A reduction in hours for this purpose may include a change in the employer’s hours of operations, a change from full-time to part-time status, taking a temporary leave of absence, or participation in a lawful labor strike. If, however, an individual is (or becomes) eligible for Medicare or group health coverage under a spouse’s plan or a new employer’s plan, he or she is not eligible for the COBRA subsidy even if he or she chooses not to enroll in such other coverage. Also, an individual whose maximum period of continuation coverage under COBRA has ended is not eligible thereafter for the COBRA subsidy.
Additional Election Opportunity
In addition to the “assistance eligible individuals” who have already elected and are receiving COBRA continuation coverage or who become eligible for and elect COBRA continuation coverage following April 1, 2021, the COBRA subsidies are also available for “assistance eligible individuals” (i) who were eligible to elect, but who did not elect, COBRA continuation coverage prior to April 1, 2021, or (ii) who previously elected COBRA continuation coverage but who stopped the coverage prior to April 1, 2021. These individuals must be given the opportunity to elect COBRA continuation coverage between April 1, 2021 and the end of the 60-day period following the date the election notice (described below) is provided. If COBRA continuation coverage is elected by any of these individuals, the coverage may be retroactive to April 1, 2021 but cannot extend beyond the maximum COBRA continuation coverage period that would have applied had the individual had chosen to elect coverage prior to April 1, 2021 or had the individual not chosen to cease the coverage prior to April 1, 2021.
The DOL reiterated in its guidance that the existing requirements for COBRA notices (including the manner and timing) continue to apply, but ARPA requires new and additional notices to provide “assistance eligible individuals” with information about the COBRA subsidies. The DOL has provided model notices for each of these circumstances (available here) on the DOL’s COBRA Premium Subsidy dedicated website, which include all of the relevant content requirements for each of the notices.
General Notice for Newly Eligible. For “assistance eligible individuals” who become entitled to elect COBRA continuation coverage between April 1, 2021 and September 30, 2021, group health plans must provide an additional notice that includes information (in clear and understandable language) about the COBRA subsidy. This additional information may be provided as an amendment to the plan’s existing notice forms or by including a separate document with the general notice otherwise required.
Additional Notice for Previously Eligible. For “assistance eligible individuals” who became entitled to elect COBRA continuation coverage before April 1, 2021, group health plans must also provide the additional notice (described above) that includes information (in clear and understandable language) about the COBRA subsidy and, if applicable, their ability to elect continuation coverage. This notice must be provided by May 31, 2021 (within 60 days following April 1, 2021).
Notice for Expiring Subsidy. Group health plans are also required to provide a notice of expiration of the COBRA subsidy between 15 and 45 days before the individual’s COBRA subsidy ends.
The DOL guidance also reminds employers that the failure to comply with these new requirements could result in a daily excise tax of up to $100 per qualified beneficiary (or $200 per family) for as long as the violation continues.
Please contact an attorney from Honigman’s Employee Benefits practice group if you have any questions. We can help you comply with the COBRA premium assistance obligations under ARPA.