DOL Issues Model Notices For COBRA Subsidy Under American Rescue Plan Act

Arent Fox

Arent Fox

As discussed in a previous alert, The American Rescue Plan Act (ARPA) provides 100% subsidized premiums for health care continuation coverage under COBRA for eligible individuals and their dependents.

View Previous Alert.

The subsidized premiums are available from April 1, 2021, through September 30, 2021 (the “Premium Assistance Period”), unless earlier terminated as discussed below.

The Department of Labor (DOL) was charged with preparing model notices for employers, plan administrators, or insurance companies to send to eligible individuals, advising them of their rights in connection with the free COBRA subsidy. The following notices were made available on April 8, 2021 (DOL Resources on COBRA Premium Subsidy). Employers are encouraged to use the model notices.

  • Model General Notice and COBRA Continuation Coverage Election Notice (PDF Download, MS Word Download): This Notice would replace the typical COBRA notices provided to terminated employees and would be given to employees who lose their health care coverage during the Premium Assistance Period as a result of an involuntary termination (except for gross misconduct) or involuntary reduction in hours. The Notice summarizes COBRA continuation coverage generally, briefly describes COBRA subsidy benefits available under the ARPA, and includes a COBRA Continuation Coverage Election Form. Before distributing to qualified individuals, the blanks in the form must be completed. A form entitled Summary of COBRA Premium Assistance Provisions Under the American Rescue Plan Act of 2021 must also be distributed with the Model General Notice (PDF Download, MS Word Download).
  • Model COBRA Continuation Coverage Notice in Connection with Extended Election Periods (PDF Download, MS Word Download): Individuals who lost health care coverage prior to April 1, 2021 because of an involuntary termination or involuntary reduction in hours and elected COBRA, and who continue to be eligible for COBRA during the Premium Assistance Period, are eligible for the subsidy. Also eligible are individuals who either did not elect COBRA or elected COBRA but discontinued it prior to April 1, 2021, but who would have been eligible for COBRA continuation benefits during the Premium Assistance Period based on the date of involuntary termination or reduction in hours; these individuals must be given a new opportunity to elect COBRA continuation coverage during the 60 day period beginning on April 1. This Notice may be used for the categories of employees discussed above and must be provided with the COBRA Summary (PDF Download, MS Word Download).
  • Model Notice of Expiration of Premium Assistance (PDF Download, MS Word Download): The ARPA requires that each assistance eligible individual receive written notice of the individual’s subsidy expiration date, the right to continue COBRA coverage without a subsidy if the maximum COBRA eligibility period has not expired, and any other coverage options that might be available. This Notice must be provided no earlier than 45 days before the subsidy expires and no later than 15 days prior. Premium assistance under the ARPA ends on the earlier of (i) September 30, 2021; (ii) an individual becomes eligible for another group health plan, such as a plan sponsored by a new employer or a spouse’s employer, or the individual becomes eligible for Medicare; or (iii) the individual reaches the end of the maximum COBRA eligibility period.
  • Model Alternative Notice of ARP Continuation Coverage Election Notice (PDF Download, MS Word Download): This Notice should be distributed by employers who are not required to provide benefits continuation coverage under COBRA, but who are required to provide continuation coverage under their respective state laws (“mini-COBRA” laws).

In addition to publishing the Model Notices, the DOL published guidance regarding the COBRA premium assistance in the form of ARPA-specific FAQs. The guidance clarifies that employers may decide whether to issue a credit or refund to an individual eligible for the ARPA COBRA subsidy who already paid a COBRA premium for April 2021 (or any other month during the Premium Assistance Period). The guidance does not, however, define an “involuntary termination” for purposes of qualifying for the subsidy. Specifically, it does not address the concern of many employers as to whether individuals who chose to stop working due to COVID issues (i.e., the need to provide child care for children not in school) are eligible for the subsidy.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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