IRS Q&As explain ARPA’s COBRA premium subsidy program
IRS Notices 2021-31 and 2021-46 explain how employers have administered the temporary COBRA subsidy created by the American Rescue Plan Act (ARPA) (Pub. L. No. 117-2). For assistance-eligible individuals (AEIs), ARPA offered 100% subsidies of COBRA premiums for coverage periods from April 1, 2021 through Sept. 30, 2021. Employers typically provided the COBRA premium assistance and sought reimbursement by claiming a tax credit on their quarterly employment taxes. For faster reimbursement, employers could reduce their employment tax deposits or request an advance of the credit.
Notice 2021-31 offers Q&A guidance and numerous examples to help employers work through complex issues related to the COBRA premium assistance and the tax credit. Topics covered include:
- Who was eligible for the COBRA subsidy?
- What health coverage could be subsidized?
- How should employers have administered the second COBRA election opportunity?
- When did the COBRA subsidy begin and end?
- How did the “outbreak period” relief interact with the premium assistance?
- How did the subsidy apply to state continuation coverage?
- How should the COBRA subsidy tax credit have been calculated?
- Who could claim the tax credit and how?
- What substantiation and recordkeeping were required?
Download the 22-page print-friendly PDF to learn about the IRS guidance and more on the COBRA subsidies. The latest update to this article reflects guidance in IRS Notice 2021-58.