Spark Notes Summary of the American Rescue Plan Act’s COBRA Subsidies

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By now, employers have heard through the proverbial grapevine that that employees are entitled to COBRA continuation health coverage subsidies under the American Rescue Plan Act of 2021 (“ARPA”). What many employers do not know, however, are the ARPA’s less glamorous—but equally critical—details including:

01. Who pays the COBRA subsidies?
Employers (or their plan sponsors) pay the subsidies—not the federal government. In exchange, however, employers will generally be able to claim a dollar-for-dollar credit against their federal payroll taxes.

02. Which employers must provide the subsidies?
Generally speaking, any private-sector employer with at least 20 employees.

03. The duration of the COBRA subsidies.
The COBRA subsidies last from April 1, 2021, to September 30, 2021, meaning that employees who continue their COBRA coverage after this period will have to pay the full amount of their premium to maintain coverage.

04. Which employees qualify for the COBRA subsidies?  
Any employee who (a) is eligible for COBRA coverage because of a reduction in hours or an involuntary termination (exception: terminations for gross misconduct) and (b) who elects COBRA coverage between April 1, 2021, and September 30, 2021.

Critically, subsidy-eligible individuals include not only those individuals who become eligible for COBRA coverage between April 1, 2021, and September 30, 2021, but also those on COBRA before April 1, 2021.

Also, perhaps counterintuitively, subsidy-eligible individuals include those who were eligible for COBRA coverage due to an involuntary termination or reduction in hours but who did not elect COBRA coverage before April 1, 2021—or those individuals who elected COBRA but discontinued such coverage before April 1, 2021.

05. What if an employee pays a COBRA premium between April 1, 2021, to September 30, 2021?
Simply put, the employee is entitled to full reimbursement of the amount paid.

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This material is provided for informational purposes only. It is not intended to constitute legal advice, nor does it create a client-lawyer relationship between MNK Law and any recipient. Recipients should consult with counsel before taking any actions based on the information contained within this material.