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DOL Flies Alone: Guidance on the 100% COBRA Subsidy under the American Rescue Plan Act of 2021

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. We previously summarized the COBRA subsidy provisions under ARPA in a blog post, available by clicking here.

Guidance Provided:  As expected, additional guidance implementing the COBRA subsidy was issued by the Department of Labor (“DOL”) on April 7, 2021 (the “Guidance”). The Guidance includes:

100% COBRA Subsidy from April 1, 2021 Until September 30, 2021

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

Additional COVID-19 Extensions = Greater Administrative Headaches for Plan Sponsors

As any employer is keenly aware, the administration of an employee benefit plan (especially a group health plan) involves a number of different deadlines imposed under the Employee Retirement Income Security Act (ERISA) and the Internal Revenue Code (Code).  Amidst concerns that the current COVID-19 pandemic may cause individuals to lose benefits due to the failure to meet certain pre-established deadlines and in recognition of the challenges group health plans may face in complying with certain notice obligations, the Department of Labor and Internal Revenue Service (collectively, the “Agencies”) jointly published notice in the Federal Register of a significant extension in application of the following statutorily prescribed deadlines:

Special Enrollment Periods

  • 30-day deadline to request enrollment in the event of a loss of eligibility for other health coverage or the acquisition of a new dependent due to marriage, birth, adoption or placement for adoption
  • 60-day deadline to request enrollment in the event of either a loss of eligibility for coverage under Medicaid or a state children’s health insurance coverage (CHIP) or gaining eligibility for premium assistance through Medicaid or CHIP.

COBRA Continuation Coverage

  • 30-day period for employer to notify plan administrator of certain COBRA qualifying events
  • 14-day period for plan administrator to issue COBRA Election Notice to qualified beneficiary
  • 60-day period for qualified beneficiary to elect COBRA continuation coverage
  • 45-day period for qualified beneficiary to submit initial COBRA premium payment
  • 30-day period for qualified beneficiary to submit subsequent COBRA premium payments
  • Qualified beneficiary’s

Caution: Non-Compliant COBRA Election Notices may be Costly

Earlier this year, an employer was sued in a class action in Federal District Court for the Southern District of Florida for violating the notice provisions of the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) with respect to its COBRA election notice. Specifically, the employees alleged that the COBRA election notices provided by the employer did not include the information required by COBRA regulations. After failing to convince the court that the case should be dismissed, the employer agreed to establish a settlement fund for the affected employees and to correct the alleged deficiencies in its COBRA election notice. Since then, two similar lawsuits have been filed in Florida courts by employees who claim that the election notices provided by their respective employers were deficient and non-compliant with COBRA.

COBRA provides that any employer with 20 or more employees that maintains a group health plan must provide a covered employee who experiences a qualifying event (and his or her covered spouse and dependents) with continuing health insurance coverage for at least 18 months. A qualifying event encompasses a number of situations which result in a loss of health insurance coverage.  The most common of these events are: (i) a covered employee’s voluntary or involuntary termination of employment (for reasons other than gross misconduct), (ii) a reduction in a covered employee’s work hours, (iii) a covered employee’s divorce or legal separation, (iv) a

Check it Out and Check it Off: 2015 Group Health Plan Checklist

Check it Out and Check it Off: 2015 Group Health Plan Checklist

October 14, 2014

Authored by: benefitsbclp

460326385With 2015 just around the corner, certain mandates under the Patient Protection and Affordable Care Act, as amended (“ACA”) are about to become effective. Health plans also have several existing enrollment and annual notice requirements. Below is a checklist of upcoming ACA mandates that employers must implement in preparation for or in 2015 and a summary of existing enrollment and annual notice requirements.

For a refresher on the ACA mandates which became effective this year, please see our 2014 group health plan checklist here.

I. ACA Requirements That Apply to All Group Health Plans (Whether Grandfathered or Not)

On or beginning with the dates specified below, a group health plan must comply with the following requirements, regardless of its status as a “grandfathered health plan”:

Obtain a Health Plan Identifier Number (HPID).

In an effort to standardize data for covered electronic transactions under HIPAA, health plans are required to obtain an HPID by November 5, 2014, although small health plans may have an additional year to comply. Regulators have confirmed that self-funded health plans are subject to this requirement, even if the plan uses an insurance company or third-party administrator for plan administration. Unfortunately, it’s not completely clear how this applies to self-funded plans, as we previously discussed. The Centers for Medicare and Medicaid Services (“CMS”) home page for HPID information may be found here.

Calculate and Pay Transitional

Employee Takes the Cake…and Doesn’t Get COBRA

June 10, 2014

Categories

In a recent decision, the Federal District Court for Idaho found that a grocery store employee who  took a stale cake and shared it with her coworkers was properly denied COBRA for her “gross misconduct.”  (The decision does not say, but we assume “gross” does not refer to the quality of the stale cake.)

The employee alleged that she had been terminated because she was a woman, but the court disagreed finding no substantial evidence that the alleged basis for her termination was a pretext for gender discrimination.

Instead, the court said that she was terminated for “theft and dishonesty” in violation of company policy.  With regard to the claim that her termination was not for gross misconduct, the Court said:

Stealing from and/or lying to one’s employer, regardless of the value of the item, constitutes a willful and intentional disregard for the interests of one’s employer and is properly considered “gross misconduct” under COBRA….Ms. Mayes has made allegations that she should not have been fired for theft because she had permission to take cakes from the bakery and allegations regarding WinCo’s investigation….Whether or not Ms. Mayes had permission to use the cakes as she did or the taking of cakes was a commonly accepted practice is disputed. Regardless, WinCo’s written policy, which Ms. Mayes agreed to, is clear and provides that theft and/or dishonesty are considered gross misconduct.

There are relatively few cases involving gross misconduct, so each one is a helpful data point.  Even so, whether the

COBRA Participants: Act Quickly to Maximize Cost Savings with ACA Special Enrollment Opportunity

Health Insurance and MoneyIn a recent CMS Bulletin, the Department of Health & Human Services announced a one-time special enrollment period for individuals who are currently eligible for, or enrolled in, COBRA continuation coverage to enroll in qualified health plans in the Marketplace.  This special enrollment period applies to the Federally Facilitated Marketplace (FFM) and ends July 1, 2014.

A person eligible for, or enrolled in, COBRA coverage is generally permitted to enroll in the Marketplace only (i) when the person is initially eligible for COBRA or has exhausted his or her COBRA coverage rights, (ii) during annual open enrollment, or (iii) during some other special enrollment period.  This one-time special enrollment period allows eligible individuals in states that utilize the FFM to terminate their COBRA coverage and enroll in qualified health plans offered through the FFM without regard to the standard enrollment period restrictions.  In the absence of another special enrollment period, the next general enrollment opportunity would be the annual open enrollment period commencing November 15, 2014.

Such a switch may allow COBRA participants to realize savings by obtaining affordable (possibly subsidized) medical insurance coverage through a public exchange.  Employers, who also stand to benefit by moving COBRA participants to alternative coverage, should consider promptly notifying COBRA participants of this limited special enrollment opportunity.

Note:  This special enrollment period does not apply to a State-Based Marketplaces unless it

Check it Out and Check it Off: 2014 Group Health Plan Checklist

Check it Out and Check it Off: 2014 Group Health Plan Checklist

October 14, 2013

Authored by: benefitsbclp

This is cross-posted from our recent client alert.

With 2014 just around the corner, numerous mandates under the Patient Protection and Affordable Care Act, as amended (“PPACA”) are about to become effective.  Below is a checklist of upcoming PPACA mandates that employers must implement in 2014, as well as a list of existing enrollment and annual notice requirements that group health plan sponsors should consider during open enrollment.

Additionally, with the recent decision of the U.S. Supreme Court in U.S. v. Windsor overturning part of the Defense of Marriage Act (“DOMA”), group health plan sponsors should take into account the impact of this decision on their plans.  As such, a brief summary of relevant DOMA considerations are provided below.

For a refresher on the PPACA mandates which became effective this year, please see our 2013 group health plan checklist here.

I. Requirements That Apply to All Group Health Plans (Whether Grandfathered or Not)

Beginning with the dates specified below, a group health plan subject to PPACA must comply with the following requirements, regardless of its status as a “grandfathered health plan”:

  • Annual limits will no longer be permitted on essential health benefits.

Currently, annual limits on “essential health benefits” cannot exceed $2 million.  Effective for plan years beginning on or after January 1, 2014, group health plans may not establish annual dollar limits on such benefits for any participant or beneficiary.  However, this prohibition does not prevent a group health plan from excluding all

DOL Follows IRS – State of Celebration Rule Applies for all ERISA Purposes

In Technical Release 2013-04, the Employee Benefit Security Administration mirrored the guidance provided by the Internal Revenue Service in Revenue Ruling 2013-17, providing clear guidance defining “spouse” and “marriage” for all purposes under ERISA. As now defined, these terms include same-sex spouses, so long as their marriage is recognized by the state in which the marriage occurred (i.e. adopting a “state of celebration” rule). In addition, the DOL confirmed that “spouse” and “marriage” do not include registered domestic partnerships, civil unions, or other similar formal relationships that may be recognized under state law but are not denominated as marriages.

Given the recent IRS guidance, this guidance by the DOL is not surprising and still doesn’t give employers enough information to update plan documents. However, there are steps employers can begin now regarding the administration of same-sex spousal benefits under ERISA plans:

Company Position – Determine company’s position on offering spousal benefits to same-sex spouses.

  • Is recognition of same-sex spouse limited to minimal legal compliance?
  • Does the company want to recognize domestic partnerships and civil unions?
  • Will proof of marriage be required for everyone?

Proof of Marriage

  • Consider a campaign to update records (e.g. beneficiary designations) and gather proof of marriage. Include information on the law change and its effects on benefit plans.

Retirement Plans – Qualified retirement plans are required to provide certain spousal protections (e.g. spousal death benefits).

  • Treat same-sex spouses as spouses. Regardless of plan language, a same-sex spouse must receive

Breaking – DOL Guidance on Same-Sex Marriage – Adopts State of Celebration Approach for ERISA Purposes

Today, the DOL released Technical Release 2013-04, providing that the Secretary of Labor will interpret the terms “spouse” and “marriage”, for purposes of ERISA and related regulations and opinions, to include individuals who are lawfully married under any state law (regardless of state of domicile).  The release states this approach is the most consistent with the Windsor decision and notes that a state of celebration approach provides a uniform rule that can be applied with certainty by employers, plan administrators, participants, and beneficiaries.    In addition, the DOL intends to issue future guidance addressing specific provisions of ERISA.

This approach is the same approach used by the IRS for purposes of federal tax law.  Please see our previous post for further details regarding the IRS approach.

We intend to provide additional analysis in future posts.

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