On April 9, the U.S. Department of Labor (DOL) issued new guidance about the COBRA subsidy available under the American Rescue Plan Act (ARPA). Employers subject to COBRA must send out the updates notices as soon as possible and no later than May 31.
As we indicated in a previous alert, ARPA made some significant, temporary changes to COBRA. Included in these changes are subsidies and new notices. The DOL guidance has clarified several of the major questions and also provided model notices. You can see all of the guidance and notices on the DOL website.
Guidance Updates from the DOL
The DOL issued FAQs about the COBRA subsidy. Among the highlights for employers are:
- The subsidy is for the full amount of the cost of COBRA (including the administration fee) from April 1 through Sept. 30.
- The subsidy is also available for state laws (referred to as mini-COBRA) that require continuation coverage similar to COBRA when COBRA does not apply.
- Employers cannot require those actively on and paying for COBRA to make any additional elections to obtain the subsidy. However, employers must still provide new notices about the subsidy to this group of individuals.
- No specific process for refunding premiums already paid for by qualified beneficiaries for April COBRA premiums was mentioned. Rather, those eligible for the subsidy are encouraged to contact their employer.
- Employers that fail to timely provide the new notices regarding the subsidy and when it ends are subject to the same penalties as when they fail to provide other COBRA notices: $100 per day per participant (up to $200 per day per family).
- The extension for when COBRA-eligible individuals are required to provide notices to their employer (or former employer) and make COBRA payments does not apply to the new notices and the election of COBRA during the subsidy period. Put another way, eligible individuals will need to elect in the 60-day window normally required for COBRA notice.
- Individuals who are eligible for COBRA and are currently obtaining coverage through an ACA Marketplace can switch to COBRA, receive the subsidy and then go back to an ACA Marketplace through a special enrollment process.
Next Steps for Employers
Review the new notices and coordinate with those responsible for providing COBRA notices for your company to ensure the proper notices get to the right individuals. There are still some outstanding questions and some that will depend on your business’s specific circumstances.