This year, the American Rescue Plan Act (ARPA) included big changes to COBRA. Offering a six-month relief period on COBRA payments for individuals who lost health coverage because of a job or hour loss, the ARPA COBRA program means companies which offer health plans are in for a big administrative challenge.

The changes include eligibility shifts, including offering COBRA to individuals who might have declined COBRA once before. Employers and plan administrators will be paying subsidies for COBRA premiums, which can claimed back in tax credits.

This premium assistance is applicable from April 1, 2021 to September 30, 2021.

Steps Your Team Can Take

Getting in compliance with the ARPA COBRA program isn’t something your team can put off. With the program already underway and some deadlines already past, if your company hasn’t yet finalized subsidy updates, then your team should be taking measures right now to catch up. Work with the appropriate members of your plan administration team or vendors to get everyone up to speed. Let’s take a look at steps your team can take to get in compliance as soon as possible.

Consider Different Coverage Options, If Applicable

Does your company offer multiple tiers of coverage to active employees? If so, you may be able to offer a similar benefit to your COBRA enrollees. Allowing COBRA recipients to enroll in a different plan from the one they had during employment is not part of the standard COBRA plan, but it is an option with the ARPA COBRA program. If your company offers this option, individuals will have up to 90 days in which to adjust their plan.

Updating Required Notices for COBRA

Just like the usual COBRA administration, the special ARPA offering requires notification to eligible participants. If your team is responsible for sending out COBRA notices, you’ll have to add some new communications to your regularly scheduled outbox.

You can find model notices for the updates mentioned at the Department of Labor’s website, in both English and Spanish. You can apply the updated language to your notices and adjust your mailing sequences accordingly.

Standard Election Notice Update: Your usual COBRA election notice needs an upgrade. You’ll have to update this notice to include the new information on premium assistance, as well as required documentation for an application.

New Election Period Notice: Since you’re now offering a second election period for eligible individuals who may have forgone COBRA or missed their deadline, now you will need to send out an Extended Election Notice to those who are newly eligible. This notice was due out on May 31, 2021.

Expiration of Premium Assistance Notice: At least 15 days but not more than 45 days before premium assistance expires, you’ll be required to send out a notice which includes information on available coverage without the subsidy.

Identify Assistance Eligible Individuals

Your Assistance Eligible Individuals (AEIs) are employees with a qualifying event such as involuntary termination or reduction of hours between April 1 and September 30, 2021. They are also employees with a qualifying event after October 1, 2019 but before April 1, 2021 who are either enrolled in COBRA coverage or who have declined COBRA coverage. Your team will need to review the past 18 months of terminations to find involuntary terminations which would create qualifying events.

It’s important to note that the 18-month eligibility period on COBRA still applies, meaning that individuals cannot extend to a 19th, 20th, 21st, etc. month on their COBRA coverage during the premium assistance period. Individuals are only eligible for premium assistance while they’re in their 18 months of available coverage.

And while retroactive coverage is available under this program, the premium assistance period remains April 1 – Sept. 30. Prior months would require payment from the individual.

You’ll also need to review current COBRA recipients who have paid for months during the premium assistance period. They will be due a refund, which must be paid within 60 days after the date of the premium payment.

Prepare for Documentation Requirements

Determine what documentation your team may require in order to certify the eligibility of anyone applying for COBRA under the ARPA program. The IRS has stated that employers can require an individual self-certify their qualifying event, as well as ineligibility for another group health plan or Medicare. Employers should retain the self-certification statements for their own subsidy claim. Also, if employers know the information to be incorrect, they can’t use the self-certification.

Review Tax Credit Information

The IRS has issued guidance on how to claim payroll tax credit for the premiums paid. The credit is to be claimed by the premium payee, and is equal to the amount that the payee would have charged for the COBRA premium, plus an administrative cost. Find full details at IRS.gov.

Are you ready for the challenges of the COBRA premium assistance period? If you need help with administration or communication, talk to a member of our team. Click here to contact us.

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