DOL Issues Model COBRA Notices and FAQs Related to ARPA
As we discussed in our client alert, on March 11th, President Biden signed the American Rescue Plan Act of 2021 (“ARPA”), which, among other things, requires an individual’s former employer or the insurance company (depending on the type of plan) to cover the full cost of COBRA premiums for any period of coverage between April 1, 2021 and September 30, 2021 (the “COBRA Subsidy”) for an eligible employee (generally, someone who was involuntarily separated or who had a reduction in hours). The employer or insurance company that pays these premiums may claim a tax credit to defray the cost of the premiums. ARPA also creates a Special Election Period where all individuals who lost group health insurance coverage within the past 18 months due to an involuntary separation or reduction in hours are required to receive notice of the COBRA Subsidy and their ability to elect COBRA by May 31, 2021. On April 7, the Department of Labor (“DOL”) issued the model notices as well as Frequently Asked Questions (“FAQs”) related to ARPA and COBRA. Though the FAQs seem largely geared toward former employees, they do offer some helpful information for employers:
Which Plans Are Covered? The COBRA Subsidy is generally available for continuation coverage under federal COBRA, as well as for State “mini-COBRA” laws – though it does not change any State program requirements or time periods for election of coverage. It applies to all group health plans sponsored by private-sector employers or unions subject to COBRA rules under ERISA, as well as to certain plans sponsored by State or local governments.
Who is Eligible? Individuals are eligible if they experience(d) a reduction in hours or involuntary termination of employment and elect COBRA continuation coverage. The FAQs provide some examples of covered reductions in hours: reduced hours due to a business’s change in hours of operation, a change in status from full-time to part time, taking a temporary leave of absence, or participating in a lawful labor strike, as long as the individual is still an employee at the time hours are reduced. The guidance does not, however, provide any additional information as to what may be considered an involuntary termination of employment, except to note that individuals terminated for “gross misconduct” are ineligible for COBRA coverage and the COBRA Subsidy. Notably, the FAQs clarify that an individual is not eligible for the COBRA Subsidy if they are eligible for other group health coverage, such as through a new employer’s or a spouse’s plan, or if the individual is eligible for Medicare. Additionally, if an eligible individual’s family member did not previously elect COBRA coverage, but now would be eligible, that family member also has the opportunity to enroll and qualify for the COBRA Subsidy.
What Notice Must be Provided?
Employers must provide notice to any eligible individual who was terminated (or had their hours reduced) prior to April 1, 2021 and who either did not elect COBRA or who did elect COBRA but is no longer enrolled, provided that these individuals have not reached their maximum COBRA coverage period. Notice must be provided by May 31, 2021 and individuals have 60 days after notice is provided to elect COBRA. These individuals can begin their coverage prospectively from the date of election, or choose to start their coverage as of April 1, regardless of when the notice is received. This election period does not extend COBRA beyond the statutory maximum period. Importantly, the FAQs state that if an eligible individual has requested the APRA COBRA Subsidy prior to the employer sending the required notice, the plans and issuers should not collect premium payments for that individual for periods of coverage beginning on or after April 1, 2021, or subsequently require the eligible individual to seek reimbursement of premiums. However, individuals who have already paid in full for a period of COBRA coverage beginning on or after April 1 through September 30 may be eligible for a credit against future payments or a refund in certain circumstances.
ARPA-specific notice must also be provided to all qualified beneficiaries who experience a reduction in hours or involuntary termination of employment between April 1, 2021 and September 30, 2021. The FAQs clarify that this notice may be provided separately or along with the general COBRA election notice.
Finally, plans and issuers must provide individuals with notice of expiration of the COBRA Subsidy which includes notice that the COBRA Subsidy will expire, the date of expiration, and that the individual may be eligible for coverage without premium assistance through COBRA or otherwise. Such notice must be provided between 15 and 45 days before the individual’s COBRA Subsidy expires.
Model notices can be found here.
Employers should coordinate closely with their ERISA counsel, as well as their insurers, on questions related to ARPA. If you have any questions regarding the above, please contact Kristina Grimshaw at kgrimshaw@fglawllc.com, or any attorney at the Firm.
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