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As part of the American Rescue Plan Act of 2021 (“ARPA”), Congress enacted a temporary Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”) subsidy for certain individuals for coverage periods from April 1, 2021 to September 30, 2021 (the “Subsidy Period”). On April 7, 2021 the United States Department of Labor (“DOL”) issued FAQs to assist employers and plan administrators to understand the subsidy.
The subsidy provides that the employee need not pay COBRA premiums during the Subsidy Period, but rather that the employer pays 100% of the subsidy to “Assistance Eligible Individuals” (“AEIs”) and then gets repaid through tax credits. The assistance applies to all “group health plans sponsored by private-sector employers or employee organizations (unions) subject to the COBRA rules under the Employee Retirement Income Security Act of 1974 (ERISA). They also apply to plans sponsored by State or local governments subject to the continuation provisions under the Public Health Service Act. The premium assistance is also available for group health insurance required under state mini-COBRA laws.”