September 30th marks the end of the ARPA COBRA premium subsidy provisions, which required employers to provide “assistance eligible individuals” (AEIs) with a 100% subsidy for premiums otherwise owed for COBRA coverage. Employers are reimbursed for the cost of COBRA coverage via a special credit which may be claimed against payroll taxes. The credit is fully refundable therefore, if the cost of providing coverage exceeded payroll taxes due, employers can receive a refund of the difference.
Employers were required to provide notice to participants that the subsidy is ending no later than September 15, 2021. Individuals who still have remaining months of COBRA eligibility may continue on COBRA (on a premium paying basis), but many will likely drop coverage now the subsidy has ended. Employers should confirm with their payroll providers or tax filers that the appropriate filings have been made to be fully reimbursed for the subsidized COBRA coverage, this typically will not occur automatically and may require special action and the use of provider specific procedures to ensure reimbursement. Employers who file their own payroll taxes can simply enter the amounts paid for coverage in their quarterly 941 reports.
September 30th also marks the end of the federal tax credits for COVID-related paid leave. Eligible employers were entitled to tax credits to defray the cost of paid leave taken by employees who are not able to work or telework due to reasons related to COVID-19, including leave taken to receive COVID–19 vaccinations or to recover from any injury, disability, illness, or condition related to the vaccinations. Once again, in order to be properly reimbursed, employers should confirm all appropriate credits for leave provided have been filed.
Although the federal tax credits are expiring, states and even local governments may still mandate paid leave for some individuals. Massachusetts has already extended its paid leave mandate through April 1, 2022. Other states and/or local governments may take similar action. It is also possible that some version of the federal paid leave tax credits could be reinstated, but as of now, the program ends on the 30th.
About the Authors. This update was prepared by HR Pros, LLC, a national HR consulting firm that helps companies reduce operational and employment related risks. Contact Christopher Brown (cbrown@hrpros.biz) or Philip Roach (philipcr@hrpros.biz) for more information.
The information provided in this update is not, is not intended to be, and shall not be construed to be, the provision of tax or legal advice, nor does it necessarily reflect the opinions of HR Pros, LLC or our clients. The content is intended as a general overview of the subject matter covered. HR Pros, LLC is not obligated to provide updates on the information presented herein. Those reading this alert are encouraged to seek direct counsel on tax or legal questions.
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