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Group health continuation coverage under the Consolidated Omnibus Reconciliation Act of 1985 (“COBRA”) permits certain group health coverage to be continued by participants and beneficiaries (“qualified beneficiaries”) when coverage is lost due to certain “qualified events,” such as termination of employment or a reduction of hours.
Under Section 9501 of the American Rescue Plan Act of 2021 (“ARPA”), an “assistance eligible individual” (“AEI”) is not required to pay the cost of COBRA coverage (“COBRA Subsidy”) for the period beginning April 1, 2021 through September 30, 2021 (“Subsidy Period”). The Employee Benefits Security Administration has issued guidance, including Frequently Asked Questions (“FAQs”) and Model Notices related to the COBRA Subsidy. Employers offering COBRA are required to provide the COBRA Subsidy to any AEI, which they then can recoup through a payroll tax credit. While the FAQs appear to provide guidance to potential AEIs, the guidance is also helpful to plan administrators. The COBRA subsidy guidance can be found here. We expect more guidance to be issued in the near future to assist plan administrators in navigating the complexities of the COBRA Subsidy.