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COBRA Subsidy Provisions of the American Rescue Plan Act



The American Rescue Plan Act (ARPA), signed into law March 11, 2021, provides a 100% subsidy of premiums for employer-sponsored group health insurance continued under the Consolidated Omnibus Budget Reconciliation Act of 1986 (COBRA) and similar state continuation of coverage (mini-COBRA) programs.

ARPA subsidies cover the full cost of COBRA or mini-COBRA premiums from April 1, 2021, through Sept. 30, 2021, for employees (and their qualifying family members), if the employee lost or loses group health insurance due to an involuntary job loss or reduction in work hours. The subsidy applies to people who are still within their original COBRA or mini-COBRA coverage period, for the length of that coverage period, even if they declined or dropped COBRA or mini-COBRA coverage earlier.

The subsidy does not apply to:
  • Individuals whose job loss was voluntary or the result of gross misconduct; or
  • Individuals who are eligible for another group health plan or Medicare.
The subsidies are funded through a payroll tax credit. Employers are required to provide new notices about the subsidy to employees. The U.S. Department of Labor (DOL) will issue model notices for this purpose.

Action Steps

Employers should familiarize themselves with the provisions of the ARPA and watch for agency guidance on its implementation.

Highlights

Eligible Individuals
The subsidy is generally available to people who elected COBRA, become eligible for COBRA, or declined or discontinued COBRA and are still within their original COBRA coverage period.

Funding
The subsidy is funded by a refundable, advanceable credit against payroll taxes taken by employers or carriers.

Option to Switch Coverage
The ARPA allows covered individuals to switch to similarly priced health coverage, if the employer allows it.

Important Dates

April 1, 2021
ARPA 100% subsidy begins to cover COBRA premiums.

Sept. 30, 2021
ARPA subsidy provision for COBRA premiums expires.

For more information on the American Rescue Plan Act, read this HR Compliance Bulletin and contact HANYS Benefit Services by email or by calling (800) 388-1963.

This Compliance Bulletin is not intended to be exhaustive nor should any discussion or opinions be construed as legal advice. Readers should contact legal counsel for legal advice. ©2021 Zywave, Inc. All rights reserved.

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