ANDREW S. WILLIAMS

Partner

ASHLEY L. ORLER

Partner

The IRS Weighs In on COBRA Subsidy

May 26, 2021

IRS Notice 2021-31 released on May 19 provides guidance on the government subsidy of COBRA continuation coverage that is available to employees and their covered dependents who lose group health coverage as a result of reduced hours of employment or involuntary termination of employment. This subsidy is provided for eligible individuals (called “Qualified Beneficiaries”) under the American Rescue Plan Act (ARPA) and is described in greater detail HERE. Among other things, the IRS Notice clarifies ARPA timing rules for participant notices of the COBRA subsidy program as well as the election period during which Qualified Beneficiaries can elect such coverage.

The IRS had joined with the Department of Labor about a year ago in issuing an administrative extension of certain deadlines applicable to group health plans, including COBRA notice and election deadlines. That guidance was subsequently modified to expressly extend the COBRA notice and election periods for up to one (1) year as part of relief provisions responsive to the COVID-19 national emergency (the “Emergency Relief Notices”). The May 19 IRS Notice addresses the issue of whether or not the deadline extensions provided by the Emergency Relief Notices apply to the deadlines provided by ARPA for the COBRA subsidy program.

The IRS Notice concludes that the deadline extensions provided by the Emergency Relief Notices do not apply to the ARPA notice of COBRA assistance and the ARPA period for the election of subsidized coverage. So, the notice of available subsidized COBRA coverage must be sent to Qualified Beneficiaries within 60 days of April 1, 2021( May 31, 2021) or, if their loss of group health coverage occurs after April 1, 2021, within 60 days of that loss of coverage. Individuals receiving this notice will then have 60 days after the notice is provided to elect subsidized COBRA coverage.

TAKEAWAY

The bottom line for employers with Qualified Beneficiaries (including former employees and their dependents) who are on or just eligible for COBRA coverage as of April 1, 2021, is that a notice of ARPA subsidized COBRA coverage must be provided to them by May 31, 2021 (we’re not aware of any extension for the Memorial Day holiday).

If you have any questions about the rules surrounding the COBRA subsidy under ARPA, Golan Christie Taglia’s Employment Law team is available to assist. Please contact Andrew Williams (312.696.1373) or Ashley Orler (312.696.2032) for more information.