Pham Harrison, LLP
Labor and Employment Litigators

News

Mandatory COBRA Subsidy to be Paid by Employers

As part of the stimulus package that was enacted on March 11, 2021 (The American Rescue Protection Act or “ARPA”), employers are now required to provide temporary COBRA and state continuation (a/k/a Mini-COBRA, which is defined as plans with 19 or fewer employees) subsidies to former employees from April 1 through September 30, 2021.  The DOL recently published guidance for employers along with model forms to be used to notify employees of the subsidies.  Please note that initial notices must be sent by May 31, 2021.  Attached you will find a detailed overview of the specific requirements.  The basics are as follows:

Premium Subsidy – Basic Qualifications

  • Employers who provide health coverage and are subject to COBRA or mini-COBRA rules must offer temporary premium assistance from April 1 until September 30, 2021.

  • Individuals have another opportunity to elect COBRA continuation coverage and receive the premium assistance if they are still within the 18-month period for COBRA if they:

    • elected COBRA continuation coverage but are no longer enrolled (e.g., discontinued coverage because unable to pay premium); or

    • declined COBRA continuation coverage when it was offered

  • Employers are not responsible for providing the premium subsidy to individuals if they are not eligible for COBRA or mini-COBRA for specified reasons including:

    • they voluntarily resigned, retired, or died;

    • they are eligible for new employer-sponsored coverage;

    • they are eligible for a spouse’s health plan; or

    • they are beyond their maximum COBRA coverage period.

Mini-COBRA differences

  • The subsidy is available only to those who:

    • Are currently enrolled in state mini-COBRA;

    • Experience a COBRA Qualifying Event during the Subsidy Period of April 1-September 30, 2021.

    • Small employers are not required to “look back” to past terminations or reductions of hours the way employers with 20 or more employees are required to do under the COBRA subsidy.

Notice Requirements

  • Employers are required to provide the following notices to all qualified individuals.

    • General Notice and COBRA or Mini-COBRA Continuation Election Notice- this notice must be provided to eligible individuals within 30 days of their qualifying event after April 1, 2021.

    • COBRA Continuation Coverage Notice in Connection with Extended Election Periods – this notice must be provided no later than May 31, 2021 to all AEIs.

    • Notice of Expiration of Period of Premium Assistance- this notice must be sent 15-45 days before an individual’s premium assistance ends. (See Termination of COBRA subsidy below). This notice must also state whether the individual is eligible to continue COBRA or Mini-COBRA coverage without the COBRA premium subsidy.

  • The DOL published “model notices” and FAQ’s, which are available at https://www.dol.gov/agencies/ebsa/laws-and-regulations/laws/cobra/premium-subsidy

Tax Credit

  • Employers may recover the costs expended on COBRA or Mini-COBRA premiums, including the 2% administrative fee, through Medicare payroll tax credits.

  • Employers can apply for a direct payment of the remaining credit amount if the cost for the health plan sponsor’s COBRA or Mini-COBRA premium exceeds its Medicare payroll tax liability.

  • A plan’s insurer may claim the tax credit only when it is a small employer plan (generally less than 20 employees) subject to a state’s “mini-COBRA” and is fully insured.

 

Click here for additional information. Should you have any questions about these new requirements, please do not hesitate to contact a Pham Harrison attorney.

Caroline Harrison