April 9, 2021
The American Rescue Plan Act of 2021, signed by President Biden on March 11, 2021, (“ARPA”) includes generous provisions granting eligible individuals who have lost their jobs or had a reduction in hours (and their family members) the right to continue their employer group health plan coverage at no cost during the period from April 1, 2021 to September 30, 2021 (“ARPA Subsidized COBRA”). Click here to see our prior alert outlining these new rights. The ARPA Subsidized COBRA provisions went into effect on April 1, meaning employers and plan administrators should have already taken steps to ensure compliance.
To assist in these efforts, the Department of Labor (“DOL”) has released guidance in the form of “FAQs About COBRA Premium Assistance Under the American Rescue Act of 2021” (“FAQs”) and an EBSA Notice titled “Notice of the Availability of the Model Health Care Continuation Coverage Notices
Required by the American Rescue Plan Act of 2021” (“Notice”). The FAQs and Notice include model notices and summaries to be provided to eligible individuals. While this latest guidance does not answer every question facing employers and plan administrators, it does provide needed insight in a few key areas that we have highlighted below. You should continue to check back with the Nelson Mullins Employee Benefit Group for additional insights as more guidance is issued by various governmental agencies.
In addition to group health plans sponsored by private employers or unions subject to COBRA continuation coverage requirements and plans sponsored by state or local governments subject to the continuation provisions under the Public Health Service Act, the FAQs clarify that ARPA Subsidized COBRA obligations also extend to group health plans that are too small to be subject to Federal COBRA, but would be required to offer continuation coverage under state laws that are comparable to the Federal COBRA provisions (known as “mini-COBRA”).
As discussed in our last alert, there are two types of “assistance eligible individuals” (“Assistance Eligible Individuals”) – (a) individuals who first become eligible for COBRA between April 1, 2021 and September 30, 2021 due to a reduction in hours or an involuntary termination of employment, and (b) individuals previously eligible for COBRA due to a reduction in hours or an involuntary termination occurring before April 1, 2021, but who did not elect COBRA continuation coverage when first offered or who initially elected COBRA but later discontinued coverage (individuals in this second category have a 60 day “special enrollment window” after receipt of the required ARPA Subsidized COBRA notice).
The FAQs clarify that, for either type of Assistance Eligible Individual, eligibility for ARPA Subsidized COBRA ends as of the first date the individual becomes eligible for Medicare or coverage in a group health plan subject to the ARPA Subsidized COBRA provisions. This includes eligibility for coverage through a new employer or a spouse’s plan (not including qualified small employer health reimbursement arrangements (QSEHRAs), health FSAs offered through a Code Section 125 cafeteria plan, or plans comprised entirely of excepted benefits (e.g., dental or vision)). Note that the DOL’s position is that mere eligibility for alternative coverage – not actual enrollment in such coverage – is disqualifying for purposes of ARPA Subsidized COBRA.
Thus, those administering the ARPA Subsidized COBRA should consider requiring that individuals confirm that no other group health plan coverage is available to them.
Many qualified beneficiaries were given extended election rights pursuant to EBSA Disaster Relief Notice 2021-01 (see our prior alert here) that could allow them up until as late as one year after their original COBRA deadline to make a COBRA election and to pay the corresponding premiums.
The FAQs clarify that the extended deadline relief provided in EBSA Disaster Relief Notice 2021-01 does not apply to the 60-day notice or election periods related to ARPA Subsidized COBRA coverage. This means that Assistance Eligible Individuals will not be allowed more than the 60-day period following receipt of the applicable ARPA Subsidized COBRA notice in which to make an election to enroll in ARPA Subsidized COBRA. This does not, however, affect the individual’s preexisting right to elect non-subsidized COBRA continuation coverage under the extended time frames provided under EBSA Disaster Relief Notice 2021-01.
The DOL has provided the following model COBRA notices to assist plans and issuers in notifying Assistance Eligible Individuals regarding their rights to ARPA Subsidized COBRA:
In addition to these model notices, the DOL issued a Summary of ARP requirements that should be included with the above notices.
ARPA directs the Secretary of Treasury to issue additional guidance on reporting tax credits, credits claimed by multiemployer plans, procedures to claim advance credits, and the possibility that third party payors (such as PEOs, CPEOs, and 3504 agents) may be able to claim the credits.
Even with the issuance of the FAQs and Notice, several questions remain unanswered:
As many of these questions remain outstanding following the issuance of the FAQs, it is our hope that additional guidance will be forthcoming.
The Nelson Mullins Employee Benefits Group is ready to assist with questions or compliance steps. Please contact one of our Employee Benefits attorneys or the Nelson Mullins attorney with whom you work. For additional information on COVID-19 related issues, please visit the Nelson Mullins COVID-19 resource page.
These materials have been prepared for informational purposes only and are not legal advice. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. Internet subscribers and online readers should not act upon this information without seeking professional counsel.