July 1, 2022

Volume XII, Number 182

Advertisement
Advertisement

July 01, 2022

Subscribe to Latest Legal News and Analysis

June 30, 2022

Subscribe to Latest Legal News and Analysis

June 29, 2022

Subscribe to Latest Legal News and Analysis

June 28, 2022

Subscribe to Latest Legal News and Analysis

COBRA Subsidies Return as Part of Latest COVID-19 Relief Bill

On March 11, 2021, President Biden signed into law the American Rescue Plan Act of 2021 (ARPA), the latest COVID-19 relief bill, which includes a substantial, temporary government subsidy of COBRA (Consolidated Omnibus Budget Reconciliation Act) premiums for “assistance eligible individuals.” 

The subsidy created by ARPA is equal to 100 percent of COBRA premiums for assistance eligible individuals, beginning on the first day of the first month after the date of enactment of ARPA (April 1) and ending on September 30, 2021 (Subsidy Period). Assistance eligible individuals generally include those who were eligible for COBRA as a result of an involuntary termination of employment or a reduction in hours resulting in a loss of coverage, and who elected COBRA during the Subsidy Period. Individuals who voluntarily terminate employment are not eligible for the subsidy.

The COBRA subsidy under ARPA will continue for assistance eligible individuals during the Subsidy Period, except in cases in which coverage terminates due to the assistance eligible individual becoming eligible for other health plan coverage, or the COBRA period (or maximum COBRA period) comes to an end. Assistance eligible individuals are required to report to plans or plan administrators when they become eligible for other health care coverage or they could face a fine of up to $250 (or more in cases of fraud). COBRA subsidies paid pursuant to ARPA are not included in gross income for assistance eligible individuals.  

ARPA also imposes a number of additional notice requirements on the plan administrator, including, but not limited to, notices that must be provided to individuals who became eligible for COBRA before the beginning of the Subsidy Period, and notices to assistance eligible individuals of an upcoming termination of COBRA premium subsidies within specified timeframes. 

Recoupment by plans and plan sponsors of COBRA premiums that would have been paid by assistance eligible individuals will operate in a manner similar to the way tax credits operated under the Families First Coronavirus Response Act (FFCRA) and the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). Plans and plan sponsors are eligible for a refundable tax credit to be taken on their quarterly tax filings against the tax imposed by Section 3111(b) of the Internal Revenue Code. Plans and plan sponsors also may elect to advance their tax credit by withholding their deposit of tax amounts due. Finally, if a plan sponsor included any of these amounts for purposes of utilizing the employee retention tax credit under the CARES Act or the required paid leave provisions of the FFCRA, they may not be included for purposes of claiming the tax credit under ARPA.

ARPA specifies that additional agency guidance is forthcoming. The operation of the COBRA premium subsidy under ARPA, coupled with the COBRA extensions announced by the Employee Benefits Security Administration, will be complex and difficult to navigate. Furthermore, there are significant issues outstanding for which additional guidance is needed, particularly surrounding the treatment of individuals who became or will become eligible for COBRA prior to April 1, 2021. Plan sponsors are encouraged to seek competent counsel with respect to these issues and their COBRA obligations.

Copyright © 2022 Robinson & Cole LLP. All rights reserved.National Law Review, Volume XI, Number 70
Advertisement
Advertisement
Advertisement
Advertisement
Advertisement
Advertisement

About this Author

Bruce Barth Benefits lawyer Robinson Cole
Partner

Bruce Barth, chair of the firm's Labor, Employment, Benefits + Immigration Group, as well as the firm’s Employee Benefits + Compensation Team, focuses his practice on the representation of employers and fiduciaries with respect to retirement and welfare benefits, executive compensation, and benefits issues in corporate transactions.

Employee Benefits

Bruce advises clients on the implications of tax, securities, labor, and other laws, including the Employee Retirement Income Security Act (ERISA). Drawing from over 30 years of employee...

860.275.8267
Virginia E. McGarrity Benefits lawyer Robinson Cole
Partner

Virginia McGarrity is a member of the firm's Employee Benefits + Compensation Group, counseling employers, insurance carriers, and service providers on a wide range of complex employee benefits and executive compensation matters.

Retirement Plan Design and Administration

Virginia’s practice addresses a broad array of issues relating to the design, drafting, and operation of qualified and nonqualified defined benefit and defined contribution plans, including 401(k), profit-sharing, multiemployer, employee stock ownership and Section 403(b) and 457(b) plans of...

860.275.8291
Alisha Sullivan Employment lawyer Robinson Cole
Associate

Alisha Sullivan is a member of the firm's Employee Benefits + Compensation Group. She focuses her practice on counseling a wide range of clients on issues arising from the creation and administration of employee benefit plans, including all aspects of plan design and administration, adhering to ERISA, the Internal Revenue Code, and other applicable laws, and plan compliance and correction issues.

Retirement Plan Design and Administration

Alisha's practice addresses a broad array of issues relating to the design, drafting, and operation of qualified and...

860.275.8360
Jean Tomasco, Robinson Cole Law Firm, Hartford, Labor and Employment, Litigation Law Attorney
Counsel

Jean Tomasco's practice involves employer counseling and employment litigation, with an emphasis on the Employee Retirement Income Security Act (ERISA) and benefits litigation. She is a member of the firm’s Health + Benefits Litigation Team and its Labor, Employment, Benefits + Immigration Group.

Employee Benefits and Compensation Litigation

Jean has more than two decades of experience handling benefit claims litigation. She represents insurers, managed care organizations, and employers in benefit...

860-275-8323

Robinson+Cole's Employee Benefits and Compensation Group provides comprehensive employee benefits services to a wide range of clients, including publicly held and privately held companies, tax-exempt organizations, educational institutions, municipalities and other governmental entities, trust companies, and financial institutions. We pride ourselves on providing benefit solutions that meet the business needs of our clients while promoting compliance with the myriad laws governing employee benefit plans. We believe that this practical approach serves our clients well,...

860-275-8267
Advertisement
Advertisement
Advertisement