Devine Millimet | NH Law Firm


Guidance Issued by the IRS Regarding the Expansion of COBRA under the American Rescue Plan Act of 2021

Erin York, Esq. & Nicole Bodoh, Esq.

June 1, 2021

The Internal Revenue Service issued Notice 2021-31 (the “Notice”) on May 18, 2021, providing guidance for the application of the provisions of the American Rescue Act of 2021 (the “Act”) relating to the temporary premium assistance for COBRA continuation coverage.  As we reported in an earlier article, the Act provides “assistance-eligible individuals (“AEIs”) with a subsidy for 100% of the COBRA premium paid to continue coverage during the period beginning April 1, 2021 and ending on September 30, 2021 (or at the end of the AEIs otherwise applicable COBRA coverage period if earlier).  To qualify for the premium subsidy (and be considered an AEI), the employee must have been involuntarily terminated from employment or experienced a reduction in hours triggering COBRA coverage. 

The Act requires that employers who sponsor group health plans to treat AEIs as having paid the full amount of their COBRA premium for the specified coverage, and in return the employers are entitled to a refundable tax credit against their quarterly Medicare payroll tax liabilities.  The Notice advises all premium payees (the employer, insurer, or multiemployer plan) to maintain records substantiating their eligibility for the credit and substantiating that the individual or family electing COBRA premium assistance is eligible for the assistance.

The Notice offers a comprehensive look at many issues that have arisen with respect to COBRA premium assistance and credit.  The guidance uses a question and answer format with examples to illustrate who is eligible for COBRA premium assistance, what qualifies as a reduction in hours or involuntary termination, what kind of coverage plan is eligible under COBRA premium assistance, the timing of the COBRA premium assistance period, extended election periods, payments to insurers under state and federal coverage, and how employers can calculate and claim the premium assistance credit. 

The Notice was published just as employers were preparing to send the required notice of additional COBRA coverage to AEIs by the May 31, 2021 deadline.  The Notice states that plan sponsors may, but are not obligated to, require individuals to self-certify that they are eligible for the COBRA premium subsidy.  Despite this statement, the Notice also warns that employers claiming the tax credit will be required to present documentary evidence of eligibility.  Therefore, it is advisable to obtain the self-certification from AEIs, which may be collected by having AEIs complete the Department of Labor’s Request for Treatment as an Assistance Eligible Individual (known as the Opt-in-Form).  Notably, the Department of Labor in guidance has stated that the Opt-In Forms are required.    

While there are additional issues that are still being considered by the Treasury Department and the IRS, this Notice provides employers with a starting point to help them navigate the COBRA premium assistance provisions in the Act.

To access the Notice, please click the following link:

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