COBRA Mayday Alert
April 19, 2021
The period provided for COBRA premium waivers under the American Rescue Plan Act of 2021 (ARPA) has begun. This six-month period began on April 1, 2021, and runs through September 30, 2021. Details are available HERE. Action by employers and their COBRA service providers is required by May 31 – and it may make sense to take action as soon as May 1.
The Department of Labor has issued compliance guidelines and revised COBRA notices that need to be provided to eligible employees and their family members. For individuals entitled to elect COBRA coverage before April 1, the revised notice must be provided by no later than May 31, 2021. This material provides a detailed explanation of the ARPA COBRA assistance program and makes it clear that eligible employees and their family members who elect COBRA continuation coverage are to be treated as having paid their COBRA premiums for the premium assistance period without having any obligation to make those payments. Translation: up to six months of free COBRA coverage is available to eligible individuals.
COBRA service providers should be able to provide and distribute the required notices but employers play a role as to the following compliance matters:
Eligible employees and family members will have 60 days following receipt of the new ARPA COBRA notices to elect subsidized COBRA coverage. Eligible individuals who lose group health coverage after April 1, 2021 may have already paid COBRA premiums by the time they are able to elect the ARPA premium waiver. Any such premiums previously forwarded to the group health plan will have to be credited against the individual's future premium payments (if any) or refunded. Consider distributing the revised COBRA notices ASAP in order to nip this complication in the bud. And bear in mind that eligible employees are not likely to take long to elect free COBRA once they are notified of that benefit.
Not all employees are eligible for subsidized COBRA coverage. The eligible category includes employees and family members who have lost group health coverage because of a reduction in employment hours or an involuntary termination of employment (other than for gross misconduct). This group may include employees and family members who lost group health coverage at any time since October 1, 2019. Employees in this group who have been "involuntarily" terminated will have to be identified by employers (not a COBRA service provider) because only employers typically have access to the facts necessary to make that determination. To assist in this determination (which is not always easy particularly in cases where an employer has offered a reduction in force severance benefit or an early retirement package) the Department of Labor has provided a helpful definition of involuntary termination – it is a termination of employment that is "not voluntary" (better guidance on this point is provided elsewhere in benefit related regulations).
It makes sense to distribute the ARPA COBRA notices as quickly as possible. Your COBRA service provider should be able to do that. But employers need to verify eligible employees and family members who have lost group health coverage at any time since October 1, 2019 so the ARPA notices can be distributed to them. Those eligible individuals will include any employee who was "involuntarily" terminated and has not qualified for subsequent group health or Medicare coverage. Only employers (and not COBRA service providers) are likely to have sufficient information to identify those employees. Employers who administer their own COBRA program should not hesitate to consult their professional advisors as to timely compliance with the new COBRA premium waiver rules.
For additional information on how the ARPA COBRA premium waiver rules apply to your organization, please contact Andrew S. Williams, Ashley L. Orler, and Katherine M. Oswald or your GCT lawyer for more details.