In our latest webinar, Legislative Frenzy: COBRA Subsidies, pandemic periods, FSA relief and more, we discussed the most recent legislative changes rolled out by Congress in the American Rescue Plan Act. One of the major changes was the introduction of a government-funded COBRA subsidy. In its wake, many benefits consultants and brokers have been left with questions.
Below we address frequently asked questions about the COBRA subsidy that fall into four main categories:
- Notification & Elections
- Premiums & Billing
- Administrative Procedures & Actions
Please continue to check our blog page for updates on this developing topic.
What benefits are eligible?
There is a subsidy for 100% of premiums (including 2% administration fees) for the cost of Group Health Plans, including: Medical, Dental, Vision, and most HRAs. The subsidy is available for both fully insured and self-insured plans. Flexible Spending Accounts are not eligible for subsidy.
What is the subsidy period? When will it end?
The subsidy period begins on April 1, 2021 through September 30, 2021. An individual will no longer be eligible for a subsidy if the individual becomes eligible for other group coverage or when the original COBRA coverage period is set to expire.
Who is eligible for a subsidy?
A subsidy must be offered to all employees and dependents who experienced a loss of coverage due to involuntary termination or reduction of hours and are within their eligible COBRA period. Individuals who voluntarily termed employment, who are eligible for Medicare or eligible for any other Group Health Plan are not eligible.
Notifications and Election Periods
What types of notifications are required?
Model General Notice and COBRA Continuation Coverage Election Notice
- For use by group health plans for qualified beneficiaries who have qualifying events
occurring from April 1, 2021 through September 30, 2021
- A summary of the subsidy provisions is to be attached and includes a form for individuals
to request to be treated as an AEI OR give notice of eligibility for other coverage.
Model Notice in Connection with Extended Election Period
For use by group health plans for qualified beneficiaries currently enrolled in COBRA
continuation coverage, due to a reduction in hours or involuntary termination (Assistance Eligible Individuals), as well as those who would currently be Assistance Eligible Individuals if they had elected and/or maintained COBRA continuation coverage
Model Notice of Expiration of Premium Assistance
- For use by group health plans to Assistance Eligible Individuals 15-45 days before their premium assistance expires
Where can I access model notices?
Model notices were published on April 7, 2021 and are available of the Department of Labor website.
When do Assistance Eligible Individuals (AEIs) need to be notified?
AEIs must be notified no later than May 31, 2021 of their right to coverage and will have 60 days to elect coverage.
Premiums and Billing
Do individuals need to pay premiums for periods prior to the effective date of the subsidy?
If the individual intended to have continuous coverage, they would be responsible for any premiums incurred prior to April 1, 2021. If an individual intends for coverage to begin on April 1, 2021, no premiums will be due.
Who receives the subsidy? Does anyone need to pay premiums?
Plan sponsors are responsible for paying premiums to the carrier and will receive a tax credit against their quarterly payroll taxes. The specific process to claim these credits has not yet been released.
However, when subsidies were offered under the Affordable Care Act, IRS Form 941 was made available for plan sponsors to claim this credit.
Should current COBRA participants continue to pay premiums?
Yes. Until an individual is notified that they are eligible for a COBRA subsidy, active COBRA participants should pay premiums.
Administrative Procedures and Actions
What actions do plan sponsors need to take regarding the COBRA subsidies?
Beginning April 23, Plan Sponsors will be able to download the Participant Lookback Report from the BRI COBRA portal and identify the Assistance Eligible Individuals on the report.
When do employers need to provide the completed Participant Lookback Report?
Employers should return the complete Participant Lookback Report by May 10 to ensure timely processing of the required notifications.
How can we make sure employees correctly elect the COBRA subsidy?
The election notices sent to AEIs will provide an attestation form in which individuals will confirm they meet the eligibility requirements for the subsidy.
The information shared in this blog and the resources linked are for educational purposes only. They may not reflect the specific considerations or nuances of a plan or administrative services and are not legal or tax advice. For legal or tax advice, consult your own counsel.