COBRA Premiums Now Being Paid by Employers
Are you aware of the COBRA rules we now live in under the Federal American Rescue Plan Act (ARPA)?
From April 1st to September 30th, 2021, employers are required to pay COBRA premiums for employees who were involuntarily separated or had a reduction in hours. Under this federally subsidized program, the government will reimburse employers dollar for dollar against their quarterly payroll tax obligations.
How Does it Work?
As a standard, employers are already required to offer COBRA coverage for 18 months after the involuntary termination and some states have implemented continuation plans. But under the new subsidy, employees and their qualifying dependents can be covered at no cost for these specific 6 months.
The program is retroactive. Even employees who turned down COBRA coverage in the past but are within their eligible window offering, can reconsider their election if the new window is beneficial to them. This is being referred to as the “Second Bite at the Apple.”
To illustrate, someone let go November 1, 2019 is eligible for COBRA through April 30, 2021 by standard. Using the “Second bite at the Apple” lookback, they could get 100% coverage free for their last month of April, 2021.
What Makes Someone Eligible?
Employees and their qualifying dependents are eligible if an employee lost or will lose their health benefits due to involuntary separation or reduction in hours. The involuntary separation or reduction in hours is not required to be related to COVID-19.
Additionally, employees who voluntarily left or were let go for misconduct cannot participate. Employees who are eligible for another group health plan, such as through their spouse’s plan or Medicare will also be denied.
What Do I Have To Do Next as an Employer?
- Be prepared for questions.
- You are responsible to proactively prepare and send notices by May 31st to those past employees who qualify for participation.
- Your COBRA election notices for newly eligible employees needs updating with this subsidy language.
- Payroll tax credits will be similar to FFCRA paid leave costs. Be sure to keep proper documentation per the IRS guidance as released.
Our experts are savvy on multiple state payroll consequences and can help you with your specific situations. Use us as your trusted resource.