The American Rescue Plan Act (ARPA) was signed into law on March 11, 2021. One of the many
important provisions of this new law is the availability of COBRA subsidies.
Beginning April 1, 2021, assistance-eligible individuals (AEIs) may receive a 100% subsidy for
COBRA premiums for any period of COBRA coverage during the period beginning on April 1,
2021, through September 30, 2021. An AEI is a COBRA qualified beneficiary covered spouse or
covered dependent, who is eligible for and elects COBRA coverage due to a qualifying event of
involuntary termination of employment or a reduction of hours. Individuals who do not have a
COBRA election in effect on April 1, 2021, but who would be an AEI if they did, are eligible for
the subsidy.
Individuals who elected but discontinued COBRA coverage before April 1, 2021, are eligible if
they would otherwise be an AEI and are still within their maximum period of coverage.
Individuals who meet the criteria may make a COBRA election during the period beginning on
April 1, 2021, and ending 60 days after they are provided the required notification of the
extended election period.
COBRA coverage elected during the extended election period will start with the first period of
coverage beginning on or after April 1, 2021, and may not extend beyond the AEI’s original
maximum period of coverage.
An employer may, but is not required to, allow AEIs to elect to enroll in different coverage.
Enrollment must occur within 90 days after the date of notice informing the individual of the
enrollment option. Enrollment in different coverage may be permitted only if:
- The premium does not exceed the premium for the coverage in which the individual was
enrolled at the time of the qualifying event - The different coverage is also offered to similarly situated active employees at the time
of the election - The different coverage is not covered that provides only excepted benefits or is a qualified small employer health reimbursement arrangement or health flexible spending arrangement.
Group health plans must provide the following notices to AEIs:
- Notice of assistance available, which informs AEIs of the availability of the subsidy and
the option to enroll in different coverage. This notice must be provided to individuals
who become eligible to elect COBRA during the period beginning on April 1, 2021, and
ending on September 30, 2021. - Notice of extended election period must be provided to individuals eligible for an
extended election period within 60 days after April 1, 2021. - Notice of expiration of subsidy must be provided between 45 and 15 days before the
date on which an individual’s subsidy will expire unless the subsidy is expiring because
the individual has gained eligibility for coverage under another group health plan or
Medicare. (ARPA Sec. 9501(a)(6))
The Department of Labor (DOL) will be issuing model notices within 30 days of March 11, 2021. These notices can be used to notify eligible individuals of the availability of assistance and the availability of an extended enrollment period. Within 45 days, the DOL will also issue model notices regarding the expiration of the subsidy. Employers will be allowed a quarterly tax credit against the Medicare payroll tax equal to the premium amounts not paid by AEIs payroll tax. Effective for tax years ending after March 11, 2021, subsidy amounts will not be included in the gross income of AEIs.
Cosmo Insurance Agency is a full-service independent insurance agency based in Hackensack (Bergen County) and Lakewood (Ocean County), New Jersey that offers an all-encompassing range of insurance options for both individuals and businesses. Cosmo keeps its promise to assure an efficient and creative approach to the services we offer. Each of our clients experience a personalized and long-term relationship with us. Our New Jersey based team of health brokers guides our clients in helping them choose the most cost-effective options. By incorporating our knowledge of the insurance guidelines for healthcare, employee benefits, life insurance, self-insurance, dental, disability, and long term care insurance, we keep our clients up-to-date with affordable plans that cover all their specific insurance needs.
