Employers Take Heed: Deadline is Near for COBRA Premium Assistance Notices

As detailed in Lake Effect's prior blog post, the American Rescue Plan Act of 2021 (ARPA) includes provisions requiring employers to temporarily subsidize the cost of COBRA continuation coverage for certain “Assistance Eligible Employees” from April 1, 2021 through September 30, 2021. Employers or plan issuers must pay premiums on behalf of such individuals and will be reimbursed through a COBRA premium assistance tax credit.
Pursuant to ARPA’s specific requirements, employers and plan issuers are also required to provide Assistance Eligible Individuals with a Notice of Expiration of Premium Assistance 15-45 days before the recipient’s premium assistance expires. For individuals still receiving the premium subsidy, this means that the expiration notice must be provided no later than September 15, 2021. Failure to meet this deadline may result in penalties. Employers should ensure that these notices are sent out in timely manner by internal HR staff, health plan issuers, or COBRA administrators.
Lake Effect is here to answer your questions about COBRA compliance, as well as other state and federal employment law issues. We continue to monitor important legal and HR developments, as well as COVID-related updates from federal, state, and local authorities. Please keep watching our blogs and emails for these important updates, as well as discussions of how compliance meets culture. To dive into these issues, contact us at info@le-hrlaw.com or 1-844-333-5253.

Call to Action: New COBRA Notices Due Soon

On April 12, 2021, Lake Effect HR & Law posted a blog notifying our readers about new COBRA provisions under the American Rescue Plan Act of 2021 (ARPA). We encourage employers who are federal or state COBRA covered employers to take prompt action, as deadlines for notices are upon us.

  • Starting April 1, 2021, employers are required to send a new ARPA COBRA summary fact sheet and new required COBRA notice to covered employees and their dependents who have had qualifying events.
  • By May 31, 2021, employers are required to send a new ARPA COBRA summary fact sheet and new extended COBRA election notice to covered employees and their dependents who had certain qualifying events between October 1, 2019 and April 1, 2021.

Please see our prior blog for live links to the required ARPA COBRA summary fact sheet and new COBRA notices. As always, if you need assistance or advice on administering these new COBRA notices, please reach out to the HR professionals and attorneys at Lake Effect HR & Law. Please know that employers and plans may be subject to an excise tax under the IRS Code for failing to satisfy the new COBRA requirements. The tax may be as much as $100 per qualified beneficiary.

We continue to monitor developments and guidance relating to the American Rescue Plan Act of 2021 and other legislative efforts to address the continuing impact of the COVID-19 pandemic. We will provide you with employment-related updates on these topics as they arise.

New COBRA Notice Requirements for Employers Under the American Rescue Plan Act

On April 7, 2021, the US Department of Labor published FAQs and model notices implementing the temporary COBRA premium assistance provisions of the American Rescue Plan Act of 2021 (ARPA). Employers and other group health plan issuers are subject to new COBRA notice and other requirements.

What: Under the ARPA, “Assistance Eligible Individuals” may elect to continue employment-based group health plan coverage for up to 5 months – from April 1, 2021 through September 30, 2021 – without paying COBRA premiums. Employers or plan issuers must pay premiums on behalf of such individuals and will be reimbursed through a COBRA premium assistance tax credit.

Who: To be an “Assistance Eligible Individual” under the ARPA, an individual must meet all of the following requirements:

  • MUST have a COBRA qualifying event that is a reduction of hours or an involuntary termination of employment (NOT including a voluntary termination or a termination for gross misconduct);
  • MUST elect COBRA continuation coverage;
  • MUST NOT be eligible for Medicare; and
  • MUST NOT be eligible for coverage under any other group health plans, such as a plan sponsored by a new employer or a spouse’s employer.

When: COBRA premium assistance is available for periods of coverage from April 1, 2021 through September 30, 2021. Assistance will end earlier if an individual:

  • Reaches the end of their maximum 18-month COBRA continuation period; OR
  • Becomes eligible for Medicare or other group health plan coverage (including from a new employer).

Notice Requirements: Employers and other plan issuers must notify qualified beneficiaries about COBRA premium assistance and other rights as follows:

Additional Election Opportunities: The ARPA provides additional COBRA election opportunities under certain circumstances:

  • Group health plans may (but are not required to) offer Assistance Eligible Individuals the option to choose coverage different from that which they had at the time of the COBRA qualifying event, subject to certain restrictions and additional notice requirements.
  • If a family member of an Assistance Eligible Individual did not initially elect COBRA continuation at the time of a qualifying event, they have an additional opportunity to enroll with premium assistance. This will not extend the period of COBRA continuation coverage beyond the original maximum period.

This summary of ARPA’s COBRA premium assistance provisions is not intended to provide an exhaustive analysis of the law, but your partners at Lake Effect are ready to help you navigate the new requirements. Employers should also work closely with their group health plan providers to ensure complete compliance with COBRA notice and coverage provisions.

We continue to monitor developments and guidance relating to the American Rescue Plan Act of 2021 and other legislative efforts to address the continuing impact of the COVID-19 pandemic. We will provide you with employment-related updates on these topics as they arise.

President Biden Signs COVID-19 Emergency Relief Bill

On March 11, President Biden signed The American Rescue Plan Act of 2021, a $1.9 trillion COVID-19 emergency relief bill, into law. This new legislation aims to help individuals, businesses, and organizations across the country offset the devastating economic effects of the COVID-19 pandemic.

Key employer-related provisions of the relief package include:

  • Unemployment benefits:
    • Extends the existing federal supplement of $300 in weekly unemployment benefits for initial claims related to the public health emergency through September 6, 2021 (previously set to expire in mid-March).
    • Waives federal income taxes on the first $10,200 of unemployment benefits received in 2020 for households earning under $150,000.
  • Payroll tax credits for FFCRA leaves extended: guarantees that employers who continue to provide paid sick and family leaves in accordance with prior FFCRA requirements will continue to receive payroll tax credits through September 2021. Note that employers are no longer required to provide FFCRA paid leaves, but the continuing tax credits provide an incentive for them to do so.
    • Employers who want to take advantage of these tax credits must follow the FFCRA leave requirements set forth in the original Act. See our prior blogs on this issue and consult with experienced HR and legal advisors to ensure FFCRA compliance and receipt of the tax credits.
  • Pandemic response:
    • Funds tens of billions of dollars for coronavirus testing and contact tracing.
    • Increases the size of the public health workforce.
    • Supports vaccine distribution and supply chains.
  • Employee Retention Tax Credit (ERTC):
    • Expands the ERTC for start-up companies and other businesses hit by the pandemic.
    • As modified by the Taxpayer Certainty and Disaster Tax Relief Act (the Relief Act), the ERTC provides a tax credit equal to 70% of the “qualified wages” paid to an employee on or after 1/1/21 until 6/30/21 up to $10,000 per calendar quarter.
    • “Eligible employers” include those that (1) were required to fully or partially suspend operations because of COVID; OR (2) experienced at least a 20% decline in gross receipts in any 2020 calendar quarter as compared to the same calendar quarter of 2019.
  • COBRA:
    • Increases the value of the federal COBRA health insurance subsidy from 85% to 100%.
    • This subsidy covers the cost of COBRA for eligible employees to continue their employer-sponsored coverage post-employment, from April 1 through September 2021.
      • This applies to employees who have lost a job or had their hours cut.
      • This does not apply to employees who qualify for new, employer-based health insurance with a new employer or to employees who voluntarily resign from employment.
  • Dependent Care FSA:
    • Permits employees to contribute $10,500 into a dependent care account, instead of the normal $5,000 per family. This may only be done if the employer agrees to modify their dependent care plan. This increase is currently only for 2021.

The following provisions of the relief package are not employment-related, but may be relevant to your employees or community:

  • Stimulus checks:
    • Provides $1,400 in new stimulus checks.
    • Individuals earning up to $75,000 per year and couples earning up to $150,000 per year will receive the full $1,400-per-person benefit, including dependents who may not have been eligible previously.
    • Stimulus payments taper off for individuals earning up to a cap of $80,000 and couples earning up to a cap of $160,000.
  • Child tax credit: Expands program to provide parents with tax credit of $3,000 per year for each child ages 6 to 17, and $3,600 for each child under age 6.
    • Low-income households that are currently ineligible or receive only a portion of the credit would now receive the full value of the credit.
    • Starting in July 2021, the federal government will send advance payments of the credit to Americans in “periodic” installments, akin to a guaranteed income for families with children. This would amount to half of the annual credit, with the remainder claimed as part of the parent’s 2021 tax return.
    • This will likely last one year.
  • Earned-income tax credit: Increases the maximum credit amount for childless households to $1,502 ($543 increase). Expands the age range to begin at 19 and eliminates the upper age limit.
  • Aid to state and local governments: Designates $350 billion for states, cities, tribal governments, and U.S. territories.
  • FEMA Emergency Food and Shelter Program: Provides $510 million for the program to support homeless services providers for overnight shelter, meals, one month’s rent and mortgage assistance and one month’s utility payments.
  • Education related: Makes all coronavirus-related student loan relief tax-free. Allocates $1.25 billion for summer enrichment, $1.25 billion for after-school programs, and $3 billion for education technology.
  • Infrastructure: Adds a $10 billion infrastructure program to help local governments continue crucial capital projects.
  • Transportation: Increases Amtrak relief funding by $200 million.
  • ACA: Expands tax credits and premium subsidies for people who enroll in coverage through the ACA exchanges. Extends certain Medicaid coverage. Provides incentives to states who have not yet expanded their Medicaid programs.
  • Health Care: Provides an additional $8.5 billion for the Provider Relief Program to assist rural health care providers.

Please note that this is not an exhaustive list of all provisions included in the relief law. We encourage you to consult with your business and tax advisors about the entire stimulus package and its impact on your organization and employees.

For additional information and discussion of prior relief packages, please see Lake Effect’s prior blogs on those topics. We will continue to closely monitor all developments in this area and provide you with important updates.

Updated Cobra Forms

On May 4, 2020, the Department of Labor and the Internal Revenue Service jointly provided updates to the notification and elections deadlines set forth in the Consolidated Omnibus Budget Reconciliation Act (COBRA) intended to protect the participants and beneficiaries in employee benefit plans during the National Emergency caused by the COVID-19 pandemic. The final rule, effective immediately, includes the following:

New “Outbreak Period” defined: The final rule defines a new “Outbreak Period” as the period from March 1, 2020 until 60 days after the end of the declared National Emergency. Note that the Trump Administration has not yet specified the end date of the National Emergency. Thus, we do not yet know when the Outbreak Period will end.

COBRA elections period extended: Normally, after a qualifying event (i.e. employment termination, reduction in hours, or other loss of coverage), employees have 60 days after receipt of a COBRA Election Notice to elect COBRA coverage. Under the new rule, employees will have until 60 days after the end of the Outbreak Period to elect COBRA coverage and return the form to the employer. Again, since we do not know the end of the Outbreak Period, we do not know when the 60-day extension ends.

Deadline to pay COBRA premiums extended: Normally, employees have a grace period of 45 days after making their COBRA election for their initial COBRA premium payment and a grace period of 30 days each month to pay their COBRA premiums for each subsequent month of COBRA coverage. Under the new rule, employees will have 45 days following their COBRA election, which is extended as noted above. Furthermore, for any COBRA premiums due during the Outbreak Period, employees will have 30 days following the end of the Outbreak Period to make catch-up payments (i.e. payments for at least March, April and May). Again, since we do not know the end of the Outbreak Period, we do not know when the 30-day extension ends.

For COBRA notices that have been sent out since March 2020, employers should communicate the new extended deadlines to all recipients. This can be done by a simple letter to the address of record for each employee. Employers should also consider supplementing or modifying COBRA notices provided to employees between May 4 and the end of the Outbreak Period to reflect the revised deadlines set forth in the new final rule.

Employers can download the updated forms in Word format on this page by clicking on the appropriate icons. The new language is highlighted in yellow and areas to be customized are highlighted in green. Employers will then need to insert information about their benefits plan/s, premium/s, COBRA deadlines, and COBRA administrator. Alternatively, the attorneys and HR professionals at Lake Effect HR & Law can help you tailor the forms for your organization. We can also assist and advise on overall COBRA administration.

The attorneys and HR professionals at Lake Effect HR & Law can help you draft the employee communication or update the COBRA forms for your organization. We recognize the administrative struggles this will present for your COBRA administrator and your health plan. Our team is also available to assist and advise on this COBRA administration.

Updated Cobra Forms

On May 1, 2020, the Department of Labor announced updates to the Consolidated Omnibus Budget Reconciliation Act (COBRA) Model General Notice and Model Election Notice. The modifications provide information about Medicare as an option for employees who have lost their health insurance as a result of a qualifying event. Given the number of layoffs and terminations resulting from the COVID-19 pandemic, these are timely updates.

Employers can download the updated forms in Word format by clicking on the button below, and the new language is highlighted in yellow and areas to be customized are highlighted in green. Employers will then need to insert information about their benefits plan/s, premium/s, COBRA deadlines, and COBRA administrator. Alternatively, the attorneys and HR professionals at Lake Effect HR & Law can help you tailor the forms for your organization. We can also assist and advise on overall COBRA administration.

Lake Effect HR & Law, LLC
(844) 333-5253 (LAKE)
info@le-hrlaw.com

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