By Lisa Calick, Director, HR Advisory
The Department of Labor has now released model notices as well as additional guidance regarding the COBRA premium subsidies provided under the American Rescue Plan Act. You can review our recent blog for background on the original Act.
The model notices and election forms can be found on the Department of Labor website, and are summarized below. These notices can be used to help employers satisfy the new notice requirements under ARPA.
Model General Notice and COBRA Continuation Coverage Election Notice
This notice is to be provided to individuals who become eligible for COBRA as a result of a qualifying event between April 1, 2021 and September 30, 2021. This would replace an employer’s current COBRA notice, as it includes the language regarding the availability of the premium subsidy to those who qualify. The DOL has also included an alternative notice for small employers subject to state mini-COBRA laws.
Model Notice in Connection with Extended Election Period
This notice is to be provided by May 31, 2021 to anyone that qualifies as an Assistance Eligible Individual (defined as those losing coverage as a result of an involuntary termination or reduction in hours), who had a qualifying event before April 1, 2021, and are still within their 18-month COBRA window. Essentially, this notice would be sent to anyone who lost coverage between October 1, 2019 and March 31, 2021, regardless if the individual elected COBRA at the time of the qualifying event. It notifies those individuals that they have a special 60-day window to elect COBRA that would cover the period between April 1, 2021 and September 30, 2021.
Summary of COBRA Premium Assistance Provisions
This summary should also be included with both notices provided to eligible individuals as indicated above. It includes the form that individuals will complete in order to request the premium subsidy.
Model Notice of Expiration of Premium Assistance
This notice should be provided to Assistance Eligible Individuals 15-45 days before their premium subsidy is set to expire during the period from April 1, 2021 to September 30, 2021.
While the FAQs that are provided on the DOL’s website are largely focused on the individual, there are some takeaways that provide more clarity to employers, including:
- Small employers, who may not be subject to federal COBRA requirements, but are subject to state mini- COBRA laws, are also subject to ARPA, including the notice requirements.
- Further explanation that a reduction in hours may qualify for COBRA premium assistance if due to a change in business operations, change to part-time status, taking a temporary leave of absence, or an individual’s participation in a lawful labor strike – as long as the individual remains employed when the hours are reduced.
- While involuntary terminations are a qualifying event for the premium subsidy, those caused by “gross misconduct” would disqualify an individual from COBRA and the premium subsidy.
- At no time is an individual eligible for the premium subsidy if eligible for another group health plan, including through a spouse’s plan or a new employer’s plan, or if eligible for Medicare.
- Each qualified beneficiary has independent COBRA election rights. If a family member had not originally elected COBRA when first eligible but would otherwise be considered an Assistance Eligible Individual, that family member has a new right under ARPA.
- Employers who fail to provide the above notices, as required, may be subject to an excise tax of $100 per qualified beneficiary, not to exceed $200 per family, for each day that the company is in violation.
While employers are not required to use the model notices provided by the Department of Labor, they are required to update existing COBRA election notices to comply with the requirements of this Act. Employers should also continue to identify their Assistance Eligible Individuals and provide them with the required notices, and work with any third-party COBRA administrator to ensure that the appropriate notices are sent by the required deadlines.
We expect there may be additional FAQs added, along with further information from the IRS on how to claim the credit for the premium subsidy. We will continue to post updates as they are announced.