New guidance for COBRA subsidy: 5 things to know

President Biden signed the American Rescue Plan Act into law on March 11, 2021, which, among other things, mandates that employers provide 100 percent COBRA premium subsidies to eligible employees and their qualified beneficiaries from April 1, 2021, through September 30, 2021. The IRS issued guidance on May 18 on expanded COBRA subsidies under the American Rescue Plan.

1. Enrolment: The subsidy is available until an AEI is permitted to enroll in other group health plan coverage—including during a waiting period. And an individual may become an AEI more than once (e.g., due to successive losses of coverage under the individual’s or a spouse’s plan). Employers may (but are not required to) obtain employee attestations or self-certifications of AEI status or eligibility for other coverage and may rely on the attestations absent actual knowledge to the contrary.
2. A much-needed relief: “The American Rescue Plan provides much-needed relief to U.S. workers as they face critical decisions about their health coverage,” said DOL Acting Assistant Secretary for Employee Benefits Security Ali Khawar. “The guidance and notices … will help to inform individuals entitled to the COBRA premium assistance about the assistance available to them.”
3. Eligibility: The subsidy is available for the COBRA continuation of any group health plan except a health FSA. This includes vision and dental plans and health reimbursement arrangements (HRAs)—including HRAs integrated with individual health coverage other than Medicare. Qualified small employer HRAs (QSEHRAs) are not group health plans and thus are not subject to COBRA or the subsidy.
4. Tax crediting: The amount of the credit is the premium that would have been charged to an AEI absent the COBRA subsidy and does not include the amount of any subsidy the employer would have otherwise provided. However, if a plan that previously charged less than the maximum premium allowed under COBRA increases the premiums for similarly situated covered employees and qualified beneficiaries, the subsidy applies to the increased premium amount.
5. A general notice: Employers must provide the Notice of Availability to AEIs before June 1 but “it is advisable to do so as soon as possible,” wrote Lisa Nelson, vice president for employee benefits, compliance and regulatory affairs, at  Leavitt Group, a San Diego-based benefits brokerage.” Employers may lean on their COBRA administrator for assistance with compliance with these new notice requirements,” she noted.