As the COBRA premium subsidy provided under the American Rescue Plan Act (ARPA) expired on September 30, 2021, the IRS issued a second set of FAQs in Notice 2021-46 (the “Notice”) to supplement prior guidance while providing specific answers to some questions that were previously unanswered.
Some of the guidance provided in the Notice includes the following:
- Eligibility for COBRA Subsidy During Extended Coverage Periods – If an individual’s original COBRA qualifying event was a reduction in hours or involuntary termination of employment, the COBRA premium subsidy is available to an individual who is entitled to elect COBRA continuation coverage for an extended period due to a disability determination, a second qualifying event, or an extension under state “mini-COBRA” laws, if the extended period falls between April 1, 2021, and September 30, 2021, even if the individual had not notified the plan or insurer of the intent to elect extended COBRA before April 1, 2021.
- End of COBRA Subsidy for Dental-Only and/or Vision-Only Coverage – If a COBRA subsidy-eligible individual who enrolls in dental-only and/or vision-only coverage becomes eligible for any other disqualifying group health plan coverage or Medicare, he or she will lose COBRA subsidy eligibility for the dental-only and/or vision-only coverage, even if the new disqualifying group health plan coverage or Medicare does not provide dental and/or vision coverage.
- Claiming the Tax Credit – The common law employer is generally the entity eligible to claim the tax credit for providing the COBRA premium subsidy. For purposes of determining the common law employer maintaining the plan, it is generally the common law employer for COBRA premium subsidy-eligible individuals whose hours have been reduced or the former common-law employer for those individuals who have been involuntarily terminated.
Some of the clarifications made in the new guidance include:
- Eligible Individuals must effectively opt-in to receive the COBRA premium subsidy, and plan sponsors are not required to provide the subsidy automatically.
- The COVID-19 COBRA deadline extension guidance does not apply to the notices or the election deadlines related to COBRA subsidies under ARPA.
- Notices required under ARPA are only required to be sent to Eligible Individuals.
- Eligible Individuals only include those people who lost coverage due to an involuntary termination of employment or a reduction in hours, regardless of whether such reduction in hours was voluntary or involuntary.
- COBRA premium subsidy is available to all group health plans subject to COBRA.