Since the March 11 passage of the American Rescue Plan Act, employers have been scrambling to understand the requirements related to the COBRA premium subsidy available to assistance eligible individuals (AEIs). The subsidy also is available for AEIs enrolled in mini-COBRA or state continuation coverage that applies to most groups with fewer than 20 employees.
COBRA subsidy highlights
Subsidy period: April 1, 2021 – September 30, 2021
AEI eligibility: Individuals who incurred a qualifying event due to an involuntary termination or a voluntary or involuntary reduction in hours and are still within their COBRA benefit period (typically 18 months). For AEIs subject to state continuation, the subsidy is only available to those currently enrolled in state continuation coverage or who become newly eligible for continuation of coverage. The benefit period varies by state.
AEI disqualifier: AEIs who are eligible for Medicare or other group health coverage, either through a new employer or spouse’s group health plan. AEIs who were dismissed for gross misconduct do not qualify for premium assistance.
Premium payment obligation: Employers subject to COBRA must subsidize coverage for AEIs and in exchange receive a tax credit against quarterly Medicare taxes through Form 941. The IRS still needs to update the form to include a line item for the COBRA subsidy payment. For employers subject to state continuation, most, but not all, insurers handle the the premium payment and receive the tax credit.
Notification deadline: For current eligible AEIs, general notice of the premium assistance opportunity is required by May 31, 2021.
