It’s Time to Send Out COBRA Subsidy Notices

The Department of Labor has published the highly anticipated Model Notices for the COBRA Subsidy that became effective April 1, 2021. The American Rescue Plan provides for COBRA premium assistance to help individuals continue their health benefits between April 1, 2021, through September 30, 2021. Employers and/or the health plan will be responsible for the payments of premiums for qualifying individuals – and will be able to seek a tax credit for reimbursement through the IRS.

What Notices Do I need to Send?

There is now a new general notice to send to qualified beneficiaries who have a qualifying event that is a reduction in hours or involuntary termination between April 1, 2021, and September 30, 2021.

For anyone who is eligible for COBRA before April 1, 2021, and would be eligible for the COBRA subsidy, this new COBRA subsidy notice must be sent by May 31, 2021. These individuals will then have 60 days from receiving the notice to elect COBRA retroactive to April 1, 2021.

Companies also need to provide a notice on the expiration of premium assistance, between 15 and 45 days before the expiration of assistance.

The COBRA subsidy does not extend the length of time an individual is eligible for COBRA. For example, if an individual’s 18 months of COBRA benefits expire as of July 1, 2021, the individual would only be eligible for the COBRA subsidy from April 1, 2021, until July 1, 2021. The notice of expiration of premium assistance would be provided to this individual between, May 17 and June 16.

Links to all of the notices can be found here:

Who is Eligible for the Subsidy?

If you have an employee/former employee or family member who would currently be eligible for COBRA because of:

  1. Reduction in hours that causes loss of coverage; or
  2. Involuntary termination, such as a layoff.

This includes individuals who declined COBRA coverage at the time of experiencing the qualifying event, as well as those who elected COBRA, but discontinued it before April 1, 2021.

The premium is not available for individuals who:

  1. Voluntarily separate from employment;
  2. Were terminated for gross misconduct;
  3. Are eligible for Medicare; or
  4. Are eligible for another Group Health Plan, such as through a new employer’s plan or a spouse’s plan.

If you have further questions on your employee’s eligibility – refer to our COBRA Subsidy Hypothetical Fact Sheet.

How Will I Know if My Former Employees Are Eligible for Another Group Health Plan?

If a qualifying individual elects the COBRA subsidy, but then becomes eligible for Medicare or another group health plan, such as by starting a new job or being able to join their spouse’s plan, the employee must notify the Company in writing. There is a penalty for anyone who fails to notice the employer/plan.

Can COBRA Eligible Individuals Switch Coverage Options?

Companies can choose to allow qualified beneficiaries to enroll in coverage different from the coverage they had at the time of the COBRA qualifying event. This is optional for employers to provide. The COBRA premium must be the same or lower than the coverage the individual had at the time of the qualifying event, this new coverage is offered to similarly situated active employees, and this coverage is not limited to excepted benefits like vision, dental, or FSA plans.

Questions about COBRA Subsidy Compliance? We can help.