On Thursday, March 11th, President Biden signed The American Rescue Plan Act of 2021 (“ARPA”) into law. Amongst broader COVID-19 and Economic relief, ARPA provides for a 100 percent federally-financed subsidy of COBRA insurance premiums that is available to certain eligible individuals during the period beginning on April 1, 2021 and ending on September 30, 2021.
Employers sponsoring group health plans subject to the COBRA rules are responsible for covering the premium cost to insurance carriers and can reclaim the cost, including any applicable administrative fee, as a payroll tax credit. In addition, these employers are responsible for notifying all Assistance Eligible Individuals (AEIs) regarding the premium subsidy. Notices to individuals that become eligible for COBRA on or after April 1, 2021 through September 30, 2021 should either be provided with existing COBRA notices or in a separate notice that outlines the eligibility requirements for the COBRA subsidy and how to elect the subsidy. A new notice is required for individuals who were eligible to elect COBRA continuation coverage due to involuntary termination or reduction in hours but who had not yet elected as of April 1, 2021, or who had elected such coverage but discontinued it prior to April 1, 2021. These notices must be provided no later than May 31, 2021 and provide these individuals 60 days to elect COBRA subsidized coverage if they qualify as an AEI.
Who Qualifies?
The subsidy will be available for AEIs from April 1, 2021 through September 30, 2021. COBRA participants must attest to meeting the below criteria in order to be an AEI:
1. Coverage was lost due to involuntary termination of employment or a reduction in hours.
2. The COBRA participant is not eligible for other group health benefits or Medicare
3. The COBRA participant is still within the 18-month Federal COBRA coverage period.
4. AEIs who:
a. have a current election in place as of April 1, 2021 will be able to take advantage of the subsidy effective April 1, subsequent to completing an attestation.
b. do not have an election in place will have the opportunity to make an election during an Extended Election Period and will have 60 days to make an election upon receipt of Notice. AEIs who make an election at this time will have coverage begin on April 1, 2021 and will not be required to retroactively pay for COBRA premiums back to their original qualifying event date.
c. become first eligible for and elect COBRA continuation on or after April 1, 2021 will be subsidy eligible on their first day of COBRA Coverage through September 30, 2021, provided they continue to otherwise meet the AEI requirements.
What does this mean for your business?
As an ADP TotalSource client, if you provide coverage through the ADP TotalSource Health and Welfare Plan, you don’t need to do anything different to remain compliant and extend this benefit to your former employees! ADP TotalSource, as your Plan Sponsor and co-employer, will continue to proactively monitor regulatory changes and update our COBRA Notices. ADP TotalSource will also notify all qualified beneficiaries within the required timeframes as provided by ARPA.
As a reminder, ADP TotalSource does not bill its clients the premium attributed for COBRA participation. This practice is not changing, and ADP TotalSource will be responsible for remitting full premium to the carriers for AEIs during the subsidy period. As a result, clients should not expect a premium credit from payroll taxes.
What does this mean for your impacted employees?
Individuals who have experienced a COBRA qualifying event due to termination of employment or reduction in hours during the past 18 months will receive a notice from ADP TotalSource in the coming weeks. Those that meet the AEI criteria can return an attestation form to receive the 100 percent COBRA premium subsidy for coverage beginning April 1, 2021 through September 30, 2021, provided they continue to remain eligible for the subsidy during that time. Those who are not considered an AEI will
be required to continue making COBRA payments if they wish to continue coverage.