The American Rescue Plan Act of 2021 (“ARPA”) includes a temporary 100% subsidy for COBRA health care continuation coverage (including under state mini-COBRA statutes) to “assistance eligible individuals” (“AEIs”). This subsidy is not elective but is required to be provided to AEIs, and employers, multiemployer trustees and insurers (collectively, the “plan sponsor”) may be surprised by the financial commitment they must make and the degree to which they must be involved to ensure this COBRA subsidy is provided to AEIs. See our separate ARPA COBRA subsidy implementation plan (attached) for an outline of the preliminary actions that plan sponsors should consider taking to meet the ARPA COBRA subsidy requirements. These preliminary actions may need to be supplemented as guidance is released.

Under the ARPA COBRA subsidy, AEIs (including covered family members) pay nothing—zip, zero, zilch—of their COBRA premium from April 1, 2021, through Sept. 30, 2021, or until eligibility for the subsidy ends, if earlier. In addition, the subsidy is not included in the AEI’s gross income for federal tax purposes. The COBRA premium (including the 2% administrative fee if applicable) for the subsidy period must be advanced by the employer (or by the plan in the case of a multiemployer plan, or the insurer in the case of very small fully insured plans not subject to federal COBRA). To obtain reimbursement for the COBRA premium advanced by the plan sponsor for this period, the plan sponsor may receive a refundable credit against payroll taxes, provided the plan sponsor takes steps to procure these credits. Also, any COBRA premiums paid by an AEI for coverage during the applicable subsidy eligibility period must be refunded to the AEI within 60 days of the date of payment.