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How to Apply the IRS's COBRA Premium Subsidy Guidance | McDermott Will & Emery

Employment Flash - June 2021 | Skadden, Arps, Slate, Meagher & Flom LLP


The ARPA and COBRA
The recently enacted American Rescue Plan Act of 2021 (ARPA) requires employers to pay 100% of the premiums required under the Consolidated Omnibus Budget Reconciliation Act (COBRA) for employees who are enrolled, or will enroll, in COBRA continuation coverage from April 1, 2021, through September 30, 2021. Employers can be reimbursed for the premium subsidy through a payroll tax credit, for which there is no income cap. In addition, the ARPA extends the COBRA election period and grants a second opportunity to elect COBRA continuation coverage for those qualified individuals who otherwise would be covered but either never elected COBRA coverage or previously discontinued their COBRA coverage. Accordingly, the ARPA requires the administrator of the applicable group health plan (or other entity) to send written notifications regarding the premium subsidy and extension, as applicable, by May 31, 2021, to those individuals who qualify. The Department of Labor (D ....

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Involuntary Termination Clarified by IRS for COBRA Subsidy


Wednesday, June 2, 2021
In Notice 2021-31, the Internal Revenue Service (IRS) provides broad guidance in a question-and-answer format on the application of the American Rescue Plan Act of 2021 (ARP) regarding premium assistance under the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) continuation coverage provisions. Perhaps most critical for group health plan administrators and insurers, the IRS has defined and illustrated the use of the term “involuntary termination of employment,” which is the primary trigger (the other is a reduction in hours) for premium assistance obligations under the ARP.
Background
Section 9501 of the ARP provides for a temporary 100%reduction in the premium otherwise payable by certain individuals and their families who elect continuation coverage due to a loss of coverage as the result of a reduction in hours or involuntary termination of employment under COBRA (and, in certain cases, under state “mini-COBRA ....

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