November 12, 2021

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.

Jennifer Wiseman
by Jennifer Wiseman

Principal, Mercer’s Law & Policy Group

Cheryl Hughes
by Cheryl Hughes

Principal, Mercer’s Law & Policy Group

Katharine Marshall
by Katharine Marshall

Principal, Mercer's Law & Policy Group

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