The latest COVID-19 relief bill, the American Rescue Plan Act (ARPA) is expected to pass the House and be signed into law this week. This latest bill is lighter on provisions that directly impact employers than previous bills, with at least one notable exception.
Under the bill, the federal government will cover 100% of the costs for COBRA coverage for both terminated employees and those who have lost eligibility due to a reduction in hours. The subsidy can begin as early as the first day of the month following passage of the ARPA (likely April 1st) and continue until September 30, 2021. The subsidized coverage can end early if the maximum COBRA period is exhausted or the qualified beneficiaries become eligible under another group health plan.
Under the ARPA, individuals who didn’t elect COBRA or whose COBRA coverage lapsed may be eligible for a new COBRA election period beginning on April 1st and ending 60 days after the date on which a new notice was provided. Employers must provide the new notice to eligible individuals of their rights to elect subsidized COBRA. The government is required to provide employers with model language for this notice within 30 days of ARPA passage.
An additional complicating factor is that many employees who experienced a loss of coverage in the past year remain eligible to retroactively elect continuation coverage under rules issued in May 2020 by the DOL and IRS which were later extended on February 26th. Many employees didn’t elect coverage under these extensions due to the high cost associated with COBRA. It is not clear how that retroactive extension will interact with the new election period and subsidy offered under the ARPA.
Employers will face a myriad of compliance and logistical challenges in implementing the new COBRA subsidy. We expect guidance to be issued in coming weeks and will provide additional information and support as the details become clear.
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