March 25, 2021
Authored by: Patrick Becker, Lisa Van Fleet and Steve Evans
The American Rescue Plan Act of 2021 (“ARPA”) provides that, for the period from April 1, 2021 until September 30, 2021, if an individual’s Consolidated Omnibus Budget Reconciliation Act (“COBRA”) qualifying event is an involuntary termination of employment or a reduction of hours (each, an “assistance eligible individual”), then 100% of the COBRA premium is paid by the employer, health plan, or insurer and the premium expense is reimbursed by the federal government through a refundable FICA tax credit. For an insured or self-insured plan, the employer applies for the tax credit; however, a multiemployer plan will apply direct for the tax credit.
The subsidy is available for both assistance eligible individuals as well as their dependents electing COBRA, but is not available for anyone who voluntarily ends their employment. The subsidy will end on the earliest of (1) the expiration of the assistance eligible individual’s maximum 18-month COBRA period, (2) the individual’s eligibility for another group health plan or Medicare, or (3) September 30, 2021 (when the temporary subsidy under ARPA ends).
The termination of employment or reduction of hours may have occurred prior to the effective date of ARPA. A new 60-day election period is created for individuals who had an involuntary termination of employment or reduction in hours within the last 18 months and did not timely elect COBRA or dropped COBRA coverage. The election period begins on the date that the individual receives the new COBRA notice.
An employer may elect to permit assistance eligible persons