Urgent Information Regarding COBRA and the American Rescue Act

For those of you with over 20 employees who are subject to Federal COBRA and you outsource this to a TPA- You will receive information directly from the TPA requesting what they need from you so they can handle the notifications and administration for you. Be prepared to provide them with a list of all employees that were terminated by you or had a reduction in hours that caused them to lose benefits between November 1, 2019, to current. Voluntary terminations, aging off, etc. are not eligible for the subsidy.

For those of you with over 20 employees who are subject to Federal COBRA and you handle your own COBRA internally- You will need to send out the new COBRA subsidy notifications. Model notices will be available in the next few weeks. You will need a list of all employees that were terminated by you or had a reduction in hours that caused them to lose benefits between November 1, 2019 to current. Voluntary terminations, aging off, etc. are not eligible for the subsidy. As always, we highly suggest you reconsider your decision to handle COBRA internally and instead work directly with a COBRA TPA. As you know, we can assist with recommendations and set up.

For those of you with under 20 employees who are subject only to Cal-COBRA- Clarification is still pending. Be prepared to provide the insurance carrier with a list of all employees that were terminated by you or had a reduction in hours that caused them to lose benefits between November 1, 2019 to current. Voluntary terminations, aging off, etc. are not eligible for the subsidy.

Note: IF a terminated employee has access to other group coverage, they will not be allowed to take the subsidy. If the employee has no other access to group coverage, they are eligible for the subsidy. At the end of the subsidy period, they could continue with COBRA (if there is additional time left on their 18 or 36 months) or they may terminate COBRA.

HOW IT WORKS: Extended Subsidies for COBRA Premiums

This American Rescue Plan Act (ARPA) provision allows Assistance Eligible Individuals (AEIs) who lost health coverage (including dental and vision coverage) due to their or their family member’s involuntary termination or reduction in hours to receive COBRA coverage at absolutely no cost for them or their covered family members from April 1, 2021, through September 30, 2021. This will be funded by the Federal government. You will pay these premiums (if over 20 employees) and get the monies back through quarterly payroll tax filing.

Allowances for Individuals/Employees
  • If an AEI already elected COBRA, they have 100% subsidized continuation starting on April 1, 2021.
  • If an AEI did not elect COBRA, they must be given the opportunity to make an election during a new extended lookback election period which ends 60 days after they are notified. They can elect to start April 1, 2021, and can enjoy the subsidy until the end of their original COBRA time frame or September 30, 2021, whichever comes first. They do not need to retro pay for any prior months.
  • If an AEI elected coverage and then dropped, they must be given an opportunity to elect coverage, provided they are still within the 18-month COBRA time frame.
  • If an AEI becomes eligible for COBRA starting April 1, 2021, or later, they are eligible for the subsidy starting on April 1, 2021.
Allowances for Clients/Employers
  • The employer or carrier will be reimbursed 100% of the total COBRA premium (102% of the actual cost) by a credit against payroll taxes.
Required COBRA Notifications & Dates
  • AEIs must be provided a Notice informing them of the availability of the subsidy and the special enrollment period to be delivered by May 31, 2021. Employees have 90 days to elect
    • The DOL will provide a model notice template for the Notice no later than April 10, 2021.
  • A Notice of subsidy expiration must be sent between 15 and 45 days before the end of the subsidy period.
    • The DOL will provide a model notice template for the Notice within the next 6 weeks.

Please feel free to contact us or your COBRA administrator if you have additional questions. Please keep in mind that more guidance is still forthcoming.