January 19, 2022

Volume XII, Number 19

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January 18, 2022

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Reminder – ARPA COBRA Notice Deadline Approaching; IRS Provides Much-Needed Guidance

As noted in our previous alerts regarding the American Recovery Plan Act (ARPA) COBRA subsidies and return to work issues, employers have until May 31, 2021, to notify “Assistance Eligible Individuals” of their potential right to subsidized COBRA coverage during the six-month period from April 1 to September 30, 2021 and potential right to enroll or re-enroll in COBRA coverage.

Assistance Eligible Individuals (or AEIs) are those who lost group health plan coverage due to a reduction of hours or an involuntary termination of employment and who are still within the possible maximum COBRA coverage period, even if they never elected COBRA or initially elected it and let it lapse. As previously noted, the DOL issued model notices that employers can use as a starting point to draft notices to AEIs. The DOL model notices are available here.

Employers who fail to timely send these notices are subject to potential penalties of up to $250 per day, per participant. Employers who rely on third-party COBRA providers to send notices must still determine which of their former employees may be eligible for the subsidy and provide a list to their COBRA administrator so that notices can be timely sent. Employers that have not contracted with an outside provider must draft and send notices on their own or obtain assistance on an ad hoc basis.

Less than two weeks before the notification deadline, on May 18, 2021, the IRS released Notice 2021-31 (Notice). The Notice includes 86 items in Q&A format that address various aspects of the COBRA subsidy, including:

  • Assistance Eligible Individuals

  • Involuntary termination of employment

  • Impact of a reduction in hours and furlough

  • Coverage that is eligible for the subsidy

  • The premium assistance period

  • The extended COBRA election period

  • Premium assistance under state “mini COBRA” plans

  • The employer premium assistance tax credit and more

The Notice includes 11 Q&A’s regarding “involuntary termination of employment” and clarifies that the following circumstances represent an involuntary termination:

  • Employee resigns during a voluntary window period in exchange for severance or early retirement benefits (provided the program meets certain regulatory requirements)

  • Employee resigns for certain “good reasons,” including:

    • In response to the employer reducing work hours (even if the reduction in hours did not cause a loss of eligibility for health insurance)

    • In response to being relocated a material distance away

  • Employee is terminated by the employer while absent due to illness or disability

  • Employee is terminated by the employer for cause (but not for “gross misconduct”)

 

© 2022 Jones Walker LLPNational Law Review, Volume XI, Number 139
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About this Author

Tim Brechtel Employee Benefits Attorney Jones Walker
Partner

Tim Brechtel began his career with the national accounting firm PricewaterhouseCoopers. His current practice focuses on assisting employers with establishing, administering, merging, and terminating qualified retirement plans, such as 401(k) plans and employee stock ownership plans (ESOPs), as well as nonqualified deferred compensation arrangements under Code Section 409A, health plans, cafeteria plans, severance plans, separation agreements, health savings accounts, flexible spending accounts, transportation, and other fringe benefit plans. His retirement plan...

504-582-8236
Ricardo X. Carlo Tax Lawyer Jones Walker Law Firm
Associate

Ricardo X. Carlo is an associate in the firm's Tax & Estates Practice Group and practices from the firm's New Orleans office. His practice focuses primarily on employee benefits and executive compensation. Mr. Carlo is a 2003 graduate of the Inter American University of Puerto Rico School of Law, where he received his juris doctor degree. In 2010, he received his LL.M. in Taxation from Georgetown University Law Center. Mr. Carlo received his Bachelor of Science in Marketing, from Florida State University in 1998. He is admitted to practice in Puerto Rico, and is...

504-582-8409
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