by WEX Benefits
The American Rescue Plan Act (ARPA) of 2021 included a 100 percent COBRA subsidy for workers who have been involuntarily terminated or experienced a reduction in hours. The subsidy is effective April 1, 2021 through September 30, 2021. ARPA was signed into law in March of 2021. The tight timelines and a need for additional guidance has left employers with a lot of questions.
That’s one reason we invited Bob Radecki, senior regulatory and public policy analyst at Benefit Comply (which provides employee benefit compliance support), onto our Benefits Buzz podcast. Watch below to hear Radecki provide his views on 10 employer questions from a recent webinar we hosted, or keep reading for even more of Benefit Comply’s thoughts on questions from employers.
The information below and in the podcast represents Radecki’s and Benefit Comply’s interpretation of the ARPA COBRA subsidy rules based on currently available information, and may change at any time. The Internal Revenue Service (IRS) and/or the Department of Labor (DOL) may issue additional guidance in the near future. Employers should be carefully monitoring ARPA developments and consulting with their legal counsel and compliance resources as they make decisions about the COBRA subsidy under ARPA. The information below and in the podcast should not be taken as legal, tax, or compliance advice, but is offered for educational purposes only. WEX is not affiliated with Benefit Comply or Radecki and does not endorse any particular views or opinions shared in this article or the podcast.
What if a person was laid off (which meets the involuntary term requirements) and was offered their job back but chose not to go back to work? Are they still eligible for the subsidy?
It appears this individual may still be eligible for the subsidy (assuming that they are not otherwise eligible for an employer-sponsored group medical plan or Medicare). In other words, an offer of employment is probably not enough to result in loss of eligibility for the COBRA subsidy.
Is death considered an involuntary termination within ARPA, especially if the death was due to COVID-19?
Under current guidance, the only two events that result in COBRA subsidy eligibility are involuntary termination of employment and reduction of hours. Therefore, an employee’s death (even death due to COVID-19) is not, under current guidance, a qualifying event that would result in subsidy eligibility for the employee’s spouse or dependents.
Are there any special considerations for employers with self-insured COBRA plans?
Self-insured employers should be aware that they are only eligible to claim a tax credit for an Assistance Eligible Individual (AEI)’s COBRA premium. Self-insured employers are not able to claim a tax credit for the claims submitted by that individual.
Does the ARPA subsidy have any impact on ACA reporting?
In the case where an individual remains employed by the employer, but has lost eligibility for coverage and is therefore offered COBRA, an applicable large employer is required to report cost of coverage information for COBRA on Form 1095-C. Therefore, an AEI who is eligible for the COBRA subsidy due to reduction of hours will have the cost of COBRA reported as $0 for months they are eligible for the COBRA subsidy.
Does the AEI notification need to be sent to employees that were out on a military leave?
Yes, if the individual remains employed during their leave, but lost eligibility for active employee coverage due to the leave. In this case, the individual would be eligible for the subsidy since their COBRA qualifying event was reduction of hours.
How does the COBRA subsidy pertain to HRAs?
The COBRA subsidy applies to health reimbursement arrangements (HRAs). Therefore, if a person loses eligibility for an HRA due to involuntary termination of employment or reduction of hours, the individual would be eligible for the subsidy and a second chance at enrollment (if not already enrolled) if they are still within their COBRA maximum coverage period and not eligible for a group medical plan sponsored by an employer or Medicare. The employer would be able to claim the HRA COBRA premium as a tax credit.
If a qualified beneficiary only elected coverage for his spouse and/or children, are the spouse and/or children eligible for the subsidy?
Yes, spouses and children are eligible for the subsidy even if the former (or current) employee does not elect COBRA as long as the event that triggered COBRA for the spouse and/or dependents was the employee’s reduction in hours or involuntary termination of employment. Spouses and dependents are not eligible for the subsidy if COBRA is triggered by one of the other events such as divorce, death of an employee, or dependent eligibility.
Answers provided above by Benefit Comply. Check out their website for more about them.
This communication is distributed for informational purposes and on the understanding that the author has not been engaged by the recipient to render legal or accounting advice or services. While every effort has been taken in compiling this information to ensure that its contents are accurate, the author cannot accept liability for the consequences of any reliance placed upon it. Readers should always seek legal counsel or professional advice before entering into any commitments. Although some Benefit Comply consultants are also lawyers, no attorney-client relationship is established by the performance of services by any Benefit Comply consultant.
The information in this blog post is for educational purposes only. It is not legal or tax advice. For legal or tax advice, you should consult your own counsel.