On March 11, 2021, President Biden signed into law the American Rescue Plan Act (“ARPA”). We previously summarized the provisions of ARPA that significantly and immediately impact group health plans in our SW Benefits Update, “Help Is on the Way – Important Changes to COBRA Under the American Rescue Plan Act.”

Among the most important changes, ARPA provides (i) a subsidy for certain insurance premiums under the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”), (ii) an opportunity for certain individuals to enroll or re-enroll in COBRA continuation coverage, and (iii) an option to elect less expensive health coverage. ARPA also imposes several imminent notice requirements, which are summarized in the above SW Benefits Update.

On April 7, 2021, the Department of Labor issued a series of Frequently Asked Questions (the “FAQs”), along with a Summary of the COBRA Premium Assistance Provisions under the American Rescue Plan Act of 2021 (the “Summary”) and various model notices (the “Model Notices”). Taken together, this guidance provides many clarifications on ARPA, including:

• The relief provided under ARPA applies to both federal COBRA continuation coverage and comparable state continuation coverage, or so-called “mini-COBRA” laws.
• Only assistance eligible individuals (“AEIs”) are entitled to receive the COBRA premium subsidy. ARPA defines an AEI as any qualified beneficiary who experiences a reduction of hours or an involuntary termination (other than by reason of gross misconduct) and who elects COBRA continuation coverage. Unfortunately, the guidance does not indicate how an employer is to decide whether a termination is voluntary or involuntary. However, the guidance clarifies that a reduction of hours need not be involuntary and may include reduced hours due to a change in the business’s hours of operation, a change from full-time to part-time status, taking a temporary leave, or participating in a labor strike.
• ARPA provides a second election period during which an individual who declined or dropped COBRA continuation coverage may enroll or re-enroll in such coverage. Initially, it was unclear whether this relief applied only to AEIs or to a broader class of qualified beneficiaries (e.g., those experiencing divorce as a qualifying event). The guidance makes clear that the second election period applies only to a qualified beneficiary whose qualifying event was a reduction in hours or an involuntary termination of employment prior to April 1, 2021 and who did not elect COBRA coverage or who elected but later dropped COBRA coverage.
• Several otherwise applicable COBRA deadlines were extended under the Notice of Extension of Certain Timeframes for Employee Benefit Plans, Participants, and Beneficiaries Affected by the COVID-19 Outbreak, which was later updated by Notice 2021-01. The guidance provides that those special extensions do not apply to the notice and second election periods under ARPA.

Employers should familiarize themselves with ARPA and the new guidance in order to answer employee questions, to timely provide the required notices, and to coordinate with and monitor third-party administrators. Employers might also consider how these rules impact any ongoing or planned terminations, including layoffs, furloughs, severance agreements, and buy-outs.

For ease of reference, the FAQs can be found here, the Summary can be found here, and the Model Notices can be found here, here, and here.