COVID Relief: COBRA Update

On March 11, 2021 President Biden signed the American Rescue Plan Act. Included in the Act are substantial temporary changes to COBRA, the ability to extend employer-based coverage. Federal COBRA regulations apply to employers with 20 or more employees, whereas New York State extends COBRA down to 1 employee. At this point this legislation only applies to the Federal level of 20 or more employees.

• Effective April 1st, 2021 and extending to September 31, 2021, employers are required to provide 100% subsidy to all employees eligible for COBRA due to involuntary termination or a reduction in hours. This includes eligible dependents. Former employees who left employment voluntarily or due to gross misconduct are not eligible.
• This includes both new COBRA eligible and anyone eligible within the last 18 months (the Federal limit for COBRA). If their 18 months COBRA eligibility ends prior to the September 1st date, their subsidy will also end.
• Eligible employee must be informed, and an Open Enrollment period must be offered, to allow those who did not elect COBRA initially to do so on April 1st. Enrollees must then be notified when the subsidy and/or coverage is going to end.
• Employers will be reimbursed for the subsidy through claiming the cost on quarterly payroll taxes. The IRS will provide forms specifically for this. These subsidies will be excluded from the employee’s gross income.
• Any employee that is eligible for this COBRA Subsidy is not eligible for subsidies through the State’s public Exchange. The assumption is that there will be a new code on next year’s 1095 highlighting the availability of the COBRA subsidy for the individual.

Information is still coming out on this new regulation and we are waiting for DOL model notices to be created and released. Our recommendation at this point is to start compiling a list of eligible individuals and stay tuned for more information.