Employer responsibilities under COBRA will drastically change on April 1, and the risks of noncompliance can be substantial. It is very important for employers to get out in front of these new requirements.
Traditionally, COBRA requires employers to offer terminated employees (and certain family members) the right to pay the premiums required to keep their group health coverage in effect post termination. The new legislation now requires employers to pay the COBRA premiums for terminated employees (and family members) who become eligible for COBRA benefits between April 1, 2021 and September 30, 2021. The federal government will ultimately subsidize your payment of the COBRA premium through a tax credit so long as you comply with the significant financial and administrative burdens ARPA (American Rescue Plan Act) imposes.
By way of summary, note the following:
The new ARPA rules apply to employees and family members who experience a “qualifying event” which disentitles them to coverage under a group plan, such as termination or a reduction in hours, between April 1, 2021 and September 30, 2021. There are some additional complexities but, basically, individuals are covered if …
- They are already enrolled in COBRA coverage on April 1, 2021.
- They could have been enrolled in COBRA coverage on April 1, 2021 but were not because they failed to elect coverage or elected coverage but subsequently dropped it.
- They first become eligible for COBRA coverage during the April 1, 2021 and September 30, 2021 subsidy period.
- Only individuals who suffered an involuntary termination of employment or a reduction in hours of work are eligible – this can get complicated.
- To obtain reimbursement for the COBRA payments, employers will be able to claim a tax credit against their quarterly payroll tax returns. We expect Treasury to offer guidance and regulations in the coming weeks and months.
- Certain information must be provided to individuals who may be eligible for these benefits. You will need to update your notice content and protocols.
So, what do you do now?
Begin identifying individuals who are eligible for the new open enrollment period, explained below. If you administer COBRA in-house you will need to do this on your own. If you have a third-party COBRA administrator reach out now to discuss its strategy for identifying these individuals. From a practical standpoint this will include individuals dating back to November of 2019. The DOL may not issue model notices until after the subsidy period begins on April 1, 2021, so employers need to be prepared to field questions from former employees about the subsidies.
Attached is the full article on the New Cobra Subsidy that will answer a lot of your questions.