Due to a variety of remaining questions surrounding the COBRA subsidies provided under the American Rescue Plan Act of 2021 (ARPA), the Hays Research and Compliance Department has put together the following compilation of frequently asked questions (FAQ). The FAQ summarizes the key information contained in the recently released Department of Labor’s (DOL) FAQ and includes common questions we have seen from clients. While the DOL FAQ focused primarily on providing information to affected employees, many of the common concerns facing employers are highlighted below. There remains a significant number of unanswered questions following the release of the DOL’s guidance. Until additional information and clarification is provided by the DOL and IRS, employers are encouraged to work with their legal counsel with respect to determining how the ARPA’s COBRA subsidy provisions apply to their businesses.

UPDATE:  The following Employer FAQ now includes updates reflecting the recently issued guidance found within IRS Notice 2021-31.

Eligible Individuals

  1. Who is eligible for the subsidy?
    • The COBRA premium assistance is available for “assistance eligible individuals (AEIs).” An AEI is a COBRA qualified beneficiary who is eligible for COBRA by reason of a qualifying event that is a reduction in hours or an involuntary termination of employment, and elects COBRA continuation coverage.
    • Assistance eligibility includes AEIs who:
      1. Experience a new qualifying event after April 1, 2021 and before September 30, 2021;
      2. Previously elected COBRA, whose previous COBRA coverage was discontinued and who are currently in the COBRA coverage period;
      3. Are still within their election period, who have not elected COBRA and who are currently in the COBRA coverage period; or
      4. Are currently enrolled in COBRA coverage.
  1. Can an individual become an AEI more than once?
    • Yes. An induvial who meets the requirements of an AEI is treated as an AEI regardless of whether the individual was also treated as an AEI at an earlier date (such as under a prior employer). For example, an employee whose employment was involuntarily terminated by Employer A on September 30, 2020 is an AEI with respect to Employer A. The former employee is hired by Employer B on May 1, 2021 and is enrolled in Employer B’s health coverage June 1, 2021. His hours are reduced on July 5, 2021 and he loses eligibility for coverage under Employer B on July 31. The individual is eligible for premium assistance under Employer A’s plan from April 1 through May 31, 2021 and under Employer B’s plan from August 1 through September 30, 2021. (New Q/A-3)
  1. Are spouses and dependents eligible for premium assistance?
    • The COBRA subsidy also applies to affected spouses and dependents who are entitled to COBRA coverage due to an employee’s reduction in hours or involuntary termination of employment.
    • Spouses and dependents who are entitled to COBRA due to other qualifying events (e.g., an employee’s voluntary termination of employment, divorce, death of the employee, or a child ceasing to be a dependent) are not eligible for premium assistance.

This document is provided for general information purposes only and should not be considered legal or tax advice or legal or tax opinion on any specific facts or circumstances. Readers are urged to consult their legal counsel and tax advisor concerning any legal or tax questions that may arise.

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