As we get closer to the September 30 expiration date of the COBRA premium subsidy provided under the American Rescue Plan Act (ARPA), the IRS has issued a second set of FAQs in Notice 2021-46 (Notice) to supplement its prior guidance and provide some specific answers to questions that remained unanswered. The first set of IRS FAQs were provided under Notice 2021-31, which we summarized in our previous LawFlash.

As a reminder, the ARPA provides for a temporary 100% COBRA premium subsidy for individuals who elect COBRA continuation coverage due to a loss of coverage as a result of any reduction in hours (whether involuntary or voluntary) or an involuntary termination of employment. The COBRA premium subsidy is available from April 1, 2021, through September 30, 2021.

Some of the guidance provided in the Notice includes the following:

• Eligibility for COBRA Subsidy During Extended Coverage Periods –If an individual’s original COBRA qualifying event was a reduction in hours or involuntary termination of employment, the COBRA premium subsidy is available to an individual who is entitled to elect COBRA continuation coverage for an extended period due to a disability determination, a second qualifying event, or an extension under state “mini-COBRA” laws, if the extended period falls between April 1, 2021, and September 30, 2021, even if the individual had not notified the plan or insurer of the intent to elect extended COBRA before April 1, 2021.
• End of COBRA Subsidy for Dental-Only and/or Vision-Only Coverage – If a COBRA subsidy eligible individual who enrolls in dental-only and/or vision-only coverage becomes eligible for any other disqualifying group health plan coverage or Medicare, he or she will lose COBRA subsidy eligibility for the dental-only and/or vision-only coverage, even if the new disqualifying group health plan coverage or Medicare does not provide dental and/or vision coverage.
• Claiming the Tax Credit – As provided in Notice 2021-31, Q/A 72(2), the common law employer is generally the entity eligible to claim the tax credit for providing the COBRA premium subsidy. For purposes of determining the common law employer maintaining the plan, it is generally the common law employer for COBRA premium subsidy eligible individuals whose hours have been reduced or the former common law employer for those individuals who have been involuntarily terminated. In addition, if a group health plan (other than a multiemployer plan) subject to federal COBRA covers employees of two or more members of a controlled group, each common law employer that is a member of the controlled group is the premium payee entitled to claim the tax credit with respect to its employees or former employees. The Notice provides certain exceptions regarding third-party payers and business reorganizations.

For more background information about the COBRA subsidies under the ARPA, see our previous blog post.

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