DOL Issues FAQs on COBRA Premium Subsidy for Qualified Employees

The American Rescue Plan Act of 2021 signed into law on March 11, 2021 authorized the federal government to temporarily pay 100 percent of COBRA premiums in order to allow employees (and their eligible family members) who have lost health insurance to stay on their company-sponsored health plan.

Employees will not be charged COBRA premiums from April 1, 2021 through September 30, 2021. Any premiums that were already collected during this time will be refunded or credited against future payments.

In order to qualify, employees must have lost their jobs due to involuntary termination or have had their hours reduced. And, they must elect COBRA continuation coverage. However, employees who are eligible for other group health coverage, including Medicare, are not eligible for the subsidy.

If an employee was previously offered COBRA continuation coverage as a result of involuntary termination or a reduction in hours and declined to take the coverage at that time, or elected the coverage and later discontinued it, the employee may be eligible to elect COBRA continuation coverage and receive the premium subsidy if the eligibility period has not yet expired

If an employee is not currently on COBRA, they will have 60 days from the date they are notified by their employer of the availability of the COBRA premium subsidy to opt in.

The employer or plan sponsor is responsible for paying all COBRA premiums for qualified individuals. The employer/plan sponsor will be able to recover these premiums through payroll tax credits when filing their quarterly 941 payroll tax return.

On April 7, 2021, the U.S. Department of Labor (DOL) issued a Frequently Asked Questions document to provide more guidance on the COBRA premium subsidy. While the FAQs are generally geared toward individuals, they do contain helpful information for employers and plan sponsors, notably:

  • The COBRA premium assistance provisions apply to group health plans sponsored by private sector employers or unions (including 501(c)(3) organizations), as well as plans sponsored by state or local governments and group health insurance required under state mini-COBRA laws.
  • The plan sponsor or health insurance issuer is responsible for providing any employee with a qualifying event a notice of eligibility to elect COBRA continuation coverage and receive the premium subsidy. The notice must be provided to qualified individuals within 60 days following April 1, 2021; i.e., by May 31, 2021.
  • This notice should also include any necessary enrollment forms, contact information for the plan administrator, a description of the election period, and an explanation of the conditions to receive the subsidy.
  • Plans must also provide qualified employees with information about the expiration date of the premium subsidy and other COBRA eligibility options.
  • The DOL also published model notices for use with the COBRA subsidy.

While the DOL’s FAQs offer some helpful guidance, there are still areas in which employers lack clarity. Importantly, companies should consult with their COBRA administrator, who can help prepare eligibility notices in accordance with the DOL’s guidance. Your COBRA administrator should also be able to provide additional guidance regarding how to claim reimbursement for the payment of the subsidy.

If you have any questions about this matter, please contact your Kreischer Miller relationship professional or any member of our team. For additional news and resources, visit our COVID-19 Resource Center here.

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