Did You Know? The American Rescue Plan Act Includes a Mandatory COBRA Subsidy Provision that Imposes New Obligations on Employers

Pullman & Comley - Labor, Employment and Employee Benefits Law

The American Rescue Plan Act (ARPA), signed into law last month, requires employers to provide subsidized COBRA coverage to employees who qualify for and elect COBRA continuation coverage due to either a reduction in hours or an involuntary termination of employment. Employers are required to pay the eligible individual’s COBRA premium for coverage periods from April 1 through September 30, 2021. Our summary of the new COBRA subsidy rules is here.

Last week the Department of Labor’s Employee Benefits Security Administration published a new webpage about the COBRA premium subsidy, including frequently asked questions (FAQs) and various model notices. Employers have until May 31, 2021, to provide the notice of the opportunity to elect subsidized coverage and individuals have 60 days following the date that notice is provided to elect subsidized coverage. Employers must take immediate action or they will face an excise tax for failing to comply, which can be as much as $100 per qualified beneficiary (no more than $200 per family) for each day the employer is in violation for the COBRA rules.

The DOL guidance is available at: https://www.dol.gov/agencies/ebsa/laws-and regulations/laws/cobra/premium-subsidy.

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