As we described in our
March 15, 2021 LawFlash, the American Rescue Plan Act of 2021 (ARPA) includes a 100% COBRA premium subsidy for any employee or dependent who is a COBRA qualified beneficiary (or will become one) resulting from an involuntary termination of employment or a reduction of hours (referred to as an Eligible Individual).
The APRA requires plan sponsors to provide specific notification of the COBRA premium subsidy to Eligible Individuals, along with notification of any early termination of the subsidy prior to September 30, 2021 (with certain exceptions). In addition, the ARPA requires the secretary of the Department of Labor, in consultation with the secretary of the Department of the Treasury and the secretary of the Department of Health and Human Services (collectively, agencies), to provide model notices within 30 days of enactment. In accordance with that requirement, the Department of Labor’s Employee Benefits Security Administration issued model notices on April 7, 2021 which can be used to satisfy the notice requirements, along with a set of FAQs which answers some outstanding questions, but leaves many questions unanswered, such as the mechanics of the payroll tax credit and the interaction of the subsidy with existing severance agreements or subsidized COBRA coverage. We expect that the Internal Revenue Service will issue additional clarifying guidance on some of the outstanding issues soon.