As we previously explained here, the American Rescue Plan Act of 2021 (“ARP”) includes a provision for 100% subsidized COBRA continuation coverage for employees and family members who experience a loss of group health plan coverage due to the employee’s involuntary termination or reduced hours of employment (the “COBRA Subsidy”) during the period from April 1, 2021 through September 30, 2021. In connection with the COBRA Subsidy, the ARP also directed the U.S. Department of Labor (“DOL”) to issue several model notices for use by employers group health plans and other entities that, pursuant to the ARP, must provide notices of the availability of the COBRA Subsidy and additional election periods for COBRA continuation coverage.

On April 7, 2021, the DOL released those new model notices and a set of FAQs pertaining to the COBRA Subsidy, which can all be found here. The FAQs provide helpful information concerning the COBRA Subsidy for both employees and employers. Notably, the FAQs include a reminder that employers could be subject to an excise tax under the Internal Revenue Code for failing to satisfy COBRA continuation coverage requirements, which could be as much as $100 per qualified beneficiary (but not more than $200 per family) for each day that the failure continues. Below is a brief description of each model notice with information regarding who it applies to and when notice should be provided.

  • Model General Notice and COBRA Continuation Coverage Election Notice

This model notice serves as the general COBRA election notice. Individuals who experience any COBRA qualifying event (not just an involuntary termination or reduced hours of employment) from April 1, 2021 through September 30, 2021, should be provided with this notice. This model notice includes information related to the COBRA Subsidy, and other rights and obligations under the ARP, as well as all of the information required in an election notice required pursuant to the general COBRA notice requirements.

  • Model Notice in Connection with Extended Election Period

This model notice satisfies the requirement under ARP that individuals who are eligible for the COBRA Subsidy, or would be eligible if they had elected and/or maintained COBRA coverage before April 1, 2021, be notified of the extended COBRA election period and their potential eligibility for the COBRA Subsidy. This model notice must be provided to such individuals by May 31, 2021.

  • Model Alternative Notice

For issuers, employers and group health plans that are exempt from COBRA but are still subject to similar state law continuation coverage rules (i.e., mini-COBRA laws), this model notice satisfies the requirement that individuals who experience a qualifying event at any time from April 1, 2021 through September 30, 2021 are notified of their potential eligibility for the COBRA Subsidy.

  • Model Notice of Expiration of Premium Assistance

This model notice satisfies the requirement that assistance-eligible individuals be notified when their period of premium assistance will expire. This notice should be sent between 15 and 45 days before an individual’s COBRA Subsidy expires. This notice does not have to be provided if an individual’s premium assistance ceases due to the individual gaining other coverage.

  • Summary of COBRA Premium Assistance Provisions under the ARP

This summary provides (1) information to individuals of the eligibility requirements for premium assistance, (2) a form for individuals to complete and submit to their employer to request treatment as an eligible individual, and (3) a form for individuals to complete and provide to the employer to notify the employer that the individual has gained other coverage and is no longer eligible for premium assistance. This summary should be provided with all the model notices promulgated by the DOL, except the Notice of Expiration of Premium Assistance.

Practical Takeaways

Employers should promptly integrate these model notices, along with the summary, into their COBRA administration process for purposes of complying with the ARP’s requirements for the COBRA Subsidy. As previously recommended, employers should identify qualified beneficiaries, track periods of premium assistance, timely send the required notices and maintain documentation in order to claim full reimbursement of the COBRA subsidy via payroll tax credits. Employers who utilize a third-party administrator for COBRA administration should continue coordination with the administrator to ensure compliance with COBRA and the ARP. Meanwhile, additional guidance from the Internal Revenue Service is still anticipated, which will provide the specific and necessary details for employers to obtain reimbursement for the costs of the COBRA Subsidy.