As noted in our previous alerts regarding the American Recovery Plan Act (ARPA) COBRA subsidies and return to work issues, employers have until May 31, 2021, to notify “Assistance Eligible Individuals” of their potential right to subsidized COBRA coverage during the six-month period from April 1 to September 30, 2021 and potential right to enroll or re-enroll in COBRA coverage.
Assistance Eligible Individuals (or AEIs) are those who lost group health plan coverage due to a reduction of hours or an involuntary termination of employment and who are still within the possible maximum COBRA coverage period, even if they never elected COBRA or initially elected it and let it lapse. As previously noted, the DOL issued model notices that employers can use as a starting point to draft notices to AEIs. The DOL model notices are available here.
Employers who fail to timely send these notices are subject to potential penalties of up to $250 per day, per participant. Employers who rely on third-party COBRA providers to send notices must still determine which of their former employees may be eligible for the subsidy and provide a list to their COBRA administrator so that notices can be timely sent. Employers that have not contracted with an outside provider must draft and send notices on their own or obtain assistance on an ad hoc basis.
Less than two weeks before the notification deadline, on May 18, 2021, the IRS released Notice 2021-31 (Notice). The Notice includes 86 items in Q&A format that address various aspects of the COBRA subsidy, including:
- Assistance Eligible Individuals
- Involuntary termination of employment
- Impact of a reduction in hours and furlough
- Coverage that is eligible for the subsidy
- The premium assistance period
- The extended COBRA election period
- Premium assistance under state “mini COBRA” plans
- The employer premium assistance tax credit and more
The Notice includes 11 Q&A’s regarding “involuntary termination of employment” and clarifies that the following circumstances represent an involuntary termination:
- Employee resigns during a voluntary window period in exchange for severance or early retirement benefits (provided the program meets certain regulatory requirements)
- Employee resigns for certain “good reasons,” including:
- In response to the employer reducing work hours (even if the reduction in hours did not cause a loss of eligibility for health insurance)
- In response to being relocated a material distance away
- Employee is terminated by the employer while absent due to illness or disability
- Employee is terminated by the employer for cause (but not for “gross misconduct”)
Please contact us if you have questions regarding COBRA subsidies or if we can help you meet your notification obligations under these time-sensitive requirements.