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New COVID-19 Relief Package Provides Free COBRA Premiums Starting April 1: What Employers and Employees Need to Know

The American Rescue Plan Act of 2021 (ARPA) was signed into law on March 11, 2021. One of the significant COVID-19 relief provisions in the bill includes a 100 percent COBRA premium subsidy so eligible individuals can continue getting health insurance for up to six months. The subsidy is available beginning April 1, 2021, and ends September 30, 2021 (the “Free COBRA Period”).

The following are some of the key provisions of the COBRA subsidy:

  • Who is eligible? Individuals eligible for free COBRA premiums (called Assistance Eligible Individuals) include anyone whose employment is involuntarily terminated (other than for gross misconduct) or has a reduction in hours, and who is eligible for COBRA during the Free COBRA Period. In addition, Assistance Eligible Individuals include individuals who would otherwise be Assistance Eligible Individuals, but (i) who did not elect COBRA coverage or who elected but discontinued COBRA coverage before April 1, 2021, and (ii) are still within their maximum 18 month COBRA period (i.e., Assistance Eligible Individuals includes eligible individuals who experienced an involuntary termination or hours reduction as far back as November 1, 2019). Assistance Eligible Individuals who are not enrolled for COBRA coverage as of April 1, 2021, have until 60 days after receiving the required notice (discussed below) to elect coverage.

  • When does the subsidy expire? Assistance Eligible Individuals will receive free COBRA premium coverage beginning on April 1 and ending on the earliest of the following: (i) September 30, 2021; (ii) the expiration of the individual’s maximum COBRA period; and (iii) the date the individual become eligible for coverage under another group health plan or Medicare.

  • Required Notices: The COBRA subsidy provisions of ARPA create two new COBRA notice requirements (in addition to the standard COBRA eligibility notice). Plan administrators must provide notice to Assistance Eligible Individuals by May 30, 2021 that such individuals are eligible for the subsidy and to enroll (or enroll again) in COBRA during the subsidy period. A notice must also be provided to Assistance Eligible Individuals of the subsidy’s expiration between 45 and 15 days before the date such individuals are no longer eligible for premium free COBRA.

  • Payment of Premiums and Reimbursement: Assistance Eligible Individuals enrolled in COBRA coverage are not charged COBRA premiums while eligible for premium free COBRA. Rather, during the subsidy period, the health care plan sponsor – typically the employer (or former employer) of the Assistance Eligible Individual – assumes the responsibility to pay COBRA premiums on behalf of the individual. Then, the employer can obtain reimbursement for any and all COBRA premiums paid on behalf of Assistance Eligible Individuals through a payroll tax credit. For credit amounts exceeding payroll taxes, the employer can apply for a refund of an overpayment.

  • Optional Open Enrollment: ARPA allows plan administrators (at their discretion) to offer a 90-day “open enrollment” window in which a COBRA-covered (or eligible) individual could enroll in coverage, or switch to another employer benefit plan option, if offered.

Next Steps

The U.S. Department of Labor and the Internal Revenue Service (IRS) have been given authority to issue additional guidance on the COBRA subsidy (including model notices), which we will be following closely. 

© 2022 ArentFox Schiff LLPNational Law Review, Volume XI, Number 85

About this Author

Lauralyn Bengel, Schiff Hardin, Business Attorney, executive compensation lawyer, employee benefits legal counsel

As a member of Schiff Hardin’s Executive Compensation and Employee Benefits group, Lauralyn Bengel is involved in all areas of establishing and maintaining qualified retirement and non-qualified employee benefit plans and arrangements, for both public and closely held companies.

Lauralyn provides her clients with strategically sound counsel on selecting, designing, implementing and managing employee benefit plans, arrangements and transactions that achieve their particular objectives. She is a trusted advisor to clients who value her legal...

Edward Spacapan Jr., Executive Compensation, Employee Benefits Attorney, Schiff

Edward Spacapan Jr. focuses on a broad range of employee benefits and executive compensation areas.

Employee Benefits

He represents Fortune 500, closely held, tax-exempt corporations with respect to employee benefits, including:

  • Mergers and acquisitions

  • Tax-qualified retirement plans

  • Health and welfare benefit plan issues, such as insurance arrangements, voluntary employee beneficiary associations, self-funding of health and other welfare benefits, and retiree medical...


Brian advises clients on corporate and employee compensation matters, including benefits, onboarding and separation, and selection and implementation of retirement plan offerings, as well as ERISA and other issues in public and private company mergers. He also provides strategic counsel regarding equity incentive plans, LLC agreements, offer letters, and consulting agreements for both companies and key employees.

Brian has experience crafting documents and descriptions for non-standardized pension plans, associated trusts, and acquisitions and restructuring transactions. Brian also...