The Department of Labor (DOL) has issued model notices, FAQs and other materials for the COBRA premium assistance program that took effect on April 1 under the American Rescue Plan Act (ARPA) (Subtitle F of Pub. L. No. 117-2). Under the program, the federal government is subsidizing 100% of COBRA premiums for qualified beneficiaries who otherwise would lose employer health coverage due to involuntary termination or reduced work hours. Employers should work with their human resources department and COBRA administrators to provide the required notices as soon as possible. The Internal Revenue Service (IRS) is expected to issue additional guidance on how employers will be reimbursed for the COBRA subsidy. (For an overview of the subsidy program, see COBRA subsidies in COVID-19 rescue plan require employer action, March 29, 2021.)
The subsidy — which pays 100% of COBRA premiums, including the 2% administration fee — is available from April 1 to Sept. 30 to assistance eligible individuals (AEIs). An AEI is a COBRA qualified beneficiary who lost or will lose group health plan coverage (other than health flexible spending arrangement (FSA)) due to reduced work hours or involuntary employment termination and whose maximum COBRA coverage period overlaps the subsidy period. The subsidy is applicable to employees’ and family members’ premiums, but is not available to anyone eligible for other group health plan coverage or Medicare. The law also gives AEIs a second chance to elect COBRA if they didn’t have continuation coverage on April 1, 2021. However, those AEIs do not have to elect COBRA retroactive to the date on which they were initially eligible for COBRA.
The ARPA creates a number of new notice requirements for employers. Employers must provide:
Employers can use the DOL’s model notices (available in both Word and PDF formats), revise existing notices to include the required subsidy information or create a separate subsidy explanation to supplement the existing COBRA election notice. Whichever approach is chosen, the law requires employers to distribute the following information:
The model ARP general notice and COBRA continuation coverage election notice is a lengthy 14-page document (the first two pages are instructions). This model is for all qualified beneficiaries with a qualifying event between April 1 and Sept. 30 — even those ineligible for the subsidy because an event other than involuntary job loss or reduced hours triggered the COBRA right.
The model notice includes general COBRA information and details about the subsidy program. The notice also includes information about pubic exchange plans, ARPA’s increased premium tax credits, and the effect of COBRA coverage — and subsidy eligibility — on premium tax credit eligibility. The notice also contains a helpful list of factors for qualified beneficiaries to consider when deciding whether to enroll in COBRA, including:
The election form included with the model notice informs qualified beneficiaries that they have 60 days from the date of the notice to elect COBRA coverage. The election form makes a subtle reference to the outbreak period relief by suggesting some qualified beneficiaries may have additional time to elect due to a national emergency. However, if qualified beneficiaries want to receive the COBRA subsidy, they must elect within 60 days.
Another model form included is for employers allowing AEIs to change COBRA coverage to a different benefit option that costs the same or less than what they had on the last day of coverage. AEIs exercising this option must complete the change form within 90 days from the date of the notice, as well as timely complete the election form.
The model notice expires on Oct. 31. Employers should expect to use the normal COBRA model notices for all qualifying events occurring after the COBRA subsidy program expires on Sept 30.
A model alternative notice is available for small employers with fewer than 20 employees (and certain church plans that are covered by state law) that have insured plans subject to state continuation requirements. The notice contains information about the subsidy program and other coverage options. The model also includes a coverage election form and, if offered by the employer, a form for switching benefit options.
Employers may use the model COBRA continuation coverage notice in connection with extended election periods for qualified beneficiaries currently enrolled in COBRA coverage due to reduced work hours or involuntary termination (AEIs), as well as those who would be AEIs if they had elected and maintained COBRA coverage. The notice describes the new COBRA rights and premium assistance created by ARPA. The model includes a COBRA election form for those not already enrolled and, if allowed by the employer, a form for AEIs electing to switch benefit options. Individuals have 60 days from the date of the notice to complete the COBRA election form (if not already enrolled) and 90 days to complete the change-in-benefits form (if offered).
The Summary of the COBRA Premium Assistance Provisions under the American Rescue Plan Act of 2021 must be distributed with all of the above model notices. The one-page summary includes eligibility criteria, the 60-day election deadline, and the requirement for subsidy recipients to inform the group health plan of eligibility for other group health plan coverage or Medicare (and the penalty for failure to inform).
A two-page Request for treatment as an assistance eligible individual form is available for qualified beneficiaries to attest that they are eligible for the subsidy when electing COBRA. Qualified beneficiaries already enrolled in COBRA coverage can send this form separately to request the subsidy. However, employers presumably should provide the subsidy to AEIs already subject to COBRA, even if they don’t return this form. The employer or the plan completes the bottom of the form, approving or denying the request, and returns a copy to the applicant.
DOL has also provided a “participant notification” form that AEIs can use to notify the plan if they become eligible for other group health coverage or Medicare and therefore are ineligible for COBRA premium assistance.
Employers may use the DOL model Notice of expiration of period of premium assistance to notify AEIs 15 to 45 days before the premium assistance expires, either because the COBRA subsidy period or the AEI’s maximum COBRA coverage period is ending, whichever occurs earlier. The model notice specifies when the subsidy will end and why; whether COBRA can continue and for how long; and what other coverage options might be available, including a special enrollment period for public exchange coverage. The notice also describes how continued COBRA coverage after the subsidy period will affect eligibility for public exchange coverage and premium tax credits. Like the model general notice described above, this notice outlines factors to consider when choosing coverage options.
A failure to satisfy ARPA’s notice requirements will be considered a failure to notify qualified beneficiaries about their right to elect COBRA coverage. Such failures can expose the employer to excise tax penalties of $100 per day for each failure and litigation brought by qualified beneficiaries seeking damages, as well as legal fees and interest.
The table below provides an overview of election notice distribution and timing requirements.
The model notices and FAQs make a number of useful clarifications regarding the subsidy program:
Employers should immediately identify the different groups of qualified beneficiaries who must receive each notice and work with COBRA administrators to ensure timely distribution of these notices and accompanying forms. Employers should also develop and maintain a recordkeeping system for completed Request for treatment as an assistance eligible individual forms and the required records related to the payroll tax offset, including each AEI’s:
Employers are encouraged to use the DOL’s model notices and forms, since appropriate use is considered good-faith compliance with the content requirements for COBRA and ARPA election notices. However, employers should prepare to customize the model notices to inform qualified beneficiaries about the beginning and end dates of COBRA coverage. This can be tricky for those receiving a second election notice, in which case the start date is April 1 but the end date can vary.
Employers should be on the lookout for guidance from Treasury, which is expected to answer a number of outstanding questions related to the subsidy program.