COVID Relief: COBRA Subsidies Update #2

Department of Labor (DOL) guidance has begun to be released regarding the COBRA Subsidies included in the American Rescue Plan Act. Despite the subsidies being effective April 1^st, the DOL didn’t release model notices until April 8^th.  Fortunately, employers have until May 31^st to mail these required letters to eligible ex-employees. For reference, please see our original post regarding employer responsibilities and other basic information. We now know that employers with fewer than 20 employees are included in the requirement to offer this to former employees in New York State.

In short, Employers must offer any employee who lost insurance coverage over the last 12-months due to involuntary termination or a reduction of hours an opportunity to enroll in COBRA even if they declined coverage initially. This includes Health, Dental and Vision coverages. If eligible, the former employee will not be required to pay premium for the period of April 1st, 2021 through September 30th, 2021. The employer will cover the cost of premium which will be reimbursed through a payroll tax credit.

The DOL has released model notices for employers to use – they can be found at COBRA Premium Subsidy | U.S. Department of Labor (dol.gov). These notices must be mailed by May 31^st, 2021 and should include the COBRA Premium Assistance Provisions Summary to assist the individual in determining if they are eligible.  The employer will also need to send the “Expiration of Premium Assistance” letter to all eligible individuals 45 days prior to the end of the subsidy. The subsidy expires at the end of their original COBRA eligibility period or September 30th, 2021, whichever comes first. 

There are essentially two lookback periods.  Any employee that lost coverage due to involuntarily termination or reduction in hours in the past 12 months needs to be notified of a new election period for COBRA as well as the 100% subsidy available to them.  Even if they did not take coverage at the time of their initial eligibility, they can now enroll effective April 1^st, 2021.  Anyone who elected COBRA coverage and maintained it going back 18-months must also be offered and informed of the subsidy, available to them through the end of their initial COBRA election period.  Individuals that were eligible between November 1^st, 2019 through March 31^st, 2020 but did NOT elect or maintain coverage do NOT need to be notified.

Several States, including New York, have additional COBRA requirements. New York, through state implemented legislation, extends COBRA down to 2 employees and increases the federal required 18-months to 36-months of eligibility. At this point, we do know that the COBRA Subsidies need to be offered by all employers. We do NOT know if the lookback period is extended back 18-months, or if it will follow the states 36-month period. We also do NOT know if groups under 20 employees will be required to cover the cost of premium. Some signs indicate that the insurance carrier will pay the premium and then be reimbursed for the costs. 

Lastly, we want you to know why this should not be ignored. While the regulations are still slowly coming out, the fines for not complying have. Employers can be fined up to $100/day per individual, Maximum $200/family for not providing this offer to former employees. If you have question s or need assistance, please reach out to us.  As more information is released we will let you know.