The U.S. Department of Labor (DOL) has issued model notices and Frequently Asked Questions (FAQs) regarding the COBRA subsidy (see COBRA Premium Subsidy guidance) made available under the American Rescue Plan Act of 2021 (ARPA).
As explained in our previous advisory, ARPA provides a 100 percent COBRA subsidy to eligible individuals from April 1, 2021, through September 30, 2021. All employers subject to COBRA must provide an initial notice to eligible individuals by May 31, 2021, informing them of the subsidy and how to elect COBRA, and a subsequent notice that the subsidy is coming to an end.
Although the DOL's model notices and guidance provide an initial step toward compliance with ARPA's requirements, the FAQs do not answer many important questions raised by employers about subsidy administration—including how payments should be processed and documented, or exactly how employers obtain reimbursement by offsetting payroll taxes.
The guidance also does not address nuances such as the meaning of "involuntary termination," coordination with other benefits offered in lieu of COBRA, what it means to be eligible for another "other group health plan," or whether association or multiple employer health plans may pay for and seek reimbursement of premiums instead of the plan's participating employers.
Employers must act immediately to identify assistance-eligible individuals and distribute notices by the May 31 deadline. The notices include:
- An ARPA General Notice and COBRA Continuation Coverage Election Notice, to be provided to all individuals who lose coverage due to any COBRA qualifying event between April 1 and September 30, 2021;
- A separate Model COBRA Continuation Coverage Notice in Connection with Extended Election Periods, to be provided to anyone who may be eligible for the subsidy; and
- A Summary of COBRA Premium Assistance Provisions under the American Rescue Plan Act of 2021, to be enclosed with either notice.
The DOL also released a Notice of Expiration of Period of Premium Assistance, to be provided prior to the expiration of the subsidy.
Significantly, while notices are not required to be distributed until May 31, 2021, the DOL's guidance clarifies that plans should not continue to charge premiums for individuals who identify themselves as assistance-eligible before the date on which the employer sends the COBRA election notice. Further, employers must coordinate with COBRA administrators and implement processes so that premiums paid for April or future months are promptly returned or applied to months after September for assistance-eligible individuals.
With the model notices now issued, employers should act quickly to identify recipients and distribute by the May 31 deadline. Please contact your DWT attorney for further information.
The facts, laws, and regulations regarding COVID-19 are developing rapidly. Since the date of publication, there may be new or additional information not referenced in this advisory. Please consult with your legal counsel for guidance.
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