DOL Releases More Details About ARPA Coverage

On March 11, 2021, President Biden signed the American Rescue Plan Act  (ARPA) which requires most employers to temporarily pay for health insurance continuation coverage (commonly referred to as COBRA) during the period between April 1 and the earlier of September 30, 2021, when the individual becomes eligible for Medicare or other group health insurance (through, for instance, a spouse or new employer) or when the individual’s 18 or 12-month continuation period expires).  This ARPA coverage applies to employees (and their qualified family members) whose hours were reduced, were laid off or were involuntarily terminated (for other than gross misconduct) anytime after October 2019, but who are still within the 18 month COBRA continuation period (or similar 12 month continuation period under Ohio’s mini-COBRA statute).    ARPA applies to for-profit, governmental, non-profit, large and small employers (who might not even be otherwise subject to COBRA), who will receive a credit against their Medicare payroll taxes for the amount of ARPA coverage provided in 2021.   On April 7, 2021, the DOL released FAQs and model notices for employers to provide to potentially eligible employees, including:  a Notice for Assistance Eligible Individuals (AEIs) who experience a qualifying event  between April 1 and September 30, 2021; a Notice for AEIs  who experienced a qualifying event prior to April 1, 2021 and are either currently enrolled, never enrolled or discontinued COBRA coverage; a Notice to be used by plans subject to Ohio's Mini-COBRA statute; a Notice of Expiration Period; and a summary of the ARPA premium assistance and Request for Treatment as an AEI form.  

Employers (and their COBRA administrators) should identify those former employees who are still within their 18 month COBRA (or, if applicable 12 month mini-COBRA) continuation period and send them the required notices before the end of May.  Even if the former employees never elected COBRA or dropped such coverage, they are entitled to elect within 60 days the new free (to them) ARPA coverage retroactive to April 1, 2021 if they have not become eligible for Medicare or another group medical plan.  Employees are not required to elect the new ARPA coverage (and may not want to do so if they already purchased an individual health plan which will not permit them to drop or to re-enroll once the ARPA coverage lapses, the individual plan has better benefits or deductible, they have already reached their deductible and do not want to start over with a new plan, or are concerned about losing tax subsidies, etc.).   Employees terminated after April 1 can receive the model notice with their regular COBRA notice (or it can be sent separately).

The DOL has provided a model “alternative” notice to former employees of small employers who are eligible for the ARPA coverage, but only under Ohio’s mini-COBRA statute.   This form requires a remarkable amount of editing by employers and/or their health plans.  Notably, ARPA does not change the election deadlines for Ohio’s mini-COBRA statute and it does not appear as though employees only covered under Ohio law may be entitled to ARPA coverage if they did not first timely elect and maintain continuation coverage under Ohio law.

Q6: Does the ARP change any State program requirements or time periods for election of continuation coverage?

No. The ARP does not change any requirement of a State continuation coverage program. The ARP only allows Assistance Eligible Individuals who elect continuation coverage under State insurance law to receive premium assistance from April 1, 2021 through September 30, 2021. It also allows Assistance Eligible Individuals to switch to other coverage offered to similarly situated active employees if the plan allows it, provided that the new coverage is no more expensive than the prior coverage. See Q15 and Q17 for more information.

Employers are also required to notify former employees between 15 and 45 days before their ARPA coverage is about to expire and the DOL has provided a Notice of Expiration of Period for such purpose.  

The statute and FAQs do not address a host of outstanding issues and ambiguities and the IRS has not yet issued any guidance about the available tax credits or refunds.  

 

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can change or be amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.

Deadline for Federal COBRA Subsidy Again Extended

Last week, Congress passed the Continuing Extension Act of 2010, which among other things, extends unemployment benefits through June 2, 2010 and again extends the federal COBRA subsidy until May 31, 2010. However, the length of time (15 months) for which an individual may receive the COBRA subsidy has not been extended. In addition, the CEA maintains the new provision from the Temporary Extension Act of 2010 which provides that individuals who experience a COBRA qualifying event of a reduction in working hours (which renders them ineligible for medical insurance even though they remain employed part-time) before March 1, 2010, but are laid off after March 1, 2010 are eligible for the COBRA subsidy. The Department of Labor has not yet amended the COBRA notifications which employers must send to eligible employees (and its website still refers to the March 31 date).

The Ohio Department of Insurance reports that on February 25, 2010, Govenor Strickland also signed a bill to authorize the temporary extension of the period of time which the laid-off employees of small employers (i.e., with less than 20 employees who are not subject to the federal COBRA statute) from 12 months to 15 months for as long as a federal COBRA subsidy is available. The ODOI website also still mentions the March 31, 2010 deadline from the TEA and has not yet addressed the affect, if any, of the CEA.

More information about the COBRA subsidy and the notices employers are required to send is available at Employers Must Send Amended COBRA Notices and DOL Publishes Model Notices for COBRA Subsidy Under Stimulus Act to Be Sent by Employers Before April 18.

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can change or be amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.

Deadline for Federal COBRA Subsidy Again Extended

Early in March, Congress passed the Temporary Extension Act of 2010, which among other things, extended unemployment benefits through April 5, 2010 and again extended the federal COBRA subsidy until March 31, 2010. However, the length of time (15 months) for which an individual may receive the COBRA subsidy has not been extended. In addition, the TEA added another provision which provides that individual who experience a COBRA qualifying event of a reduction in working hours (which renders them ineligible for medical insurance even though they remain employed part-time) before March 1, 2010, but are laid off after March 1, 2010 are now eligible for the COBRA subsidy. The Department of Labor has amended the COBRA notifications which employers must send to eligible employees (even though the explanation section of its website still refers to the February 28 date).

The Ohio Department of Insurance has reported that on February 25, 2010, Govenor Strickland also signed a bill to authorize the temporary extension of the period of time which the laid-off employees of small employers (i.e., with less than 20 employees who are not subject to the federal COBRA statute) from 12 months to 15 months for as long as a federal COBRA subsidy is available. The ODOI website also mentions the new March 31, 2010 deadline.

More information about the COBRA subsidy and the notices employers are required to send is available at Employers Must Send Amended COBRA Notices and DOL Publishes Model Notices for COBRA Subsidy Under Stimulus Act to Be Sent by Employers Before April 18.

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Information here can change or be amended without notice. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with or retain an employment attorney.

Employers Must Send Amended COBRA Notices

In December, President Obama signed the Department of Defense Appropriations Act for 2010 (the “DDAA”). In addition to prohibiting mandatory arbitration agreements which cover Title VII claims brought by employees of defense contractors, it also extended and expanded the COBRA premium subsidy established last year as part of the American Recovery and Reinvestment Act of 2009 (and reported last year here). The DDAA extends the duration of the COBRA subsidy had been scheduled to expire on December 31, 2009. Now, individual will be eligible for the COBRA subsidy if they are experienced a qualifying event (like termination) between September 1, 2008 and February 28, 2010 and the duration of the subsidy has been extended from 9 months to 15 months. Last month, the Department of Labor issued new model COBRA notices which employers are required to send out to newly eligible individuals, individuals who were receiving the subsidy and individuals whose eligibility period expired prior to December 19, 2009. Likewise, the Ohio Department of Insurance issued updated notices for small employers who are not covered by COBRA so that they are consistent with the new federal law. Employers should send out the notices within 60 days of when the individual became eligible for COBRA and no later than February 17, 2010.

There are three new notices (two federal and one state notice). The

DOL Publishes Model Notices for COBRA Subsidy Under Stimulus Act to Be Sent by Employers Before April 18

As summarized here on February 23, 2009, the recently enacted American Recovery and Reinvestment Act of 2009 (the “Act”) contains a provision where the federal government will partially subsidize the continuation of medical insurance coverage for involuntarily terminated employees for up to nine months if they are eligible for continued medical coverage under COBRA or similar state law. The continued medical coverage is available to any employee who participates in an employer-sponsored health plan and who is involuntarily terminated after September 1, 2008 but before December 31, 2009 – even if the employee did not initially elect to continue medical coverage after his or her termination. Under the Act, the Department of Labor is required to publicize acceptable model notices by mid-March 2009 and employers are required to send by April 18, 2009 the revised notice to all employees involuntarily terminated since September 1, 2008 (and to other eligible individuals who lost medical coverage between September 30 and February 16). The DOL has recently published on its website the model notices required by the Act and they can be accessed at http://www.dol.gov/ebsa/COBRAmodelnotice.html.

As explained by the DOL, the Act mandates that health “plans notify certain current and former participants and beneficiaries about the premium reduction. The Department created model notices to help plans and individuals comply with these requirements. Each model notice is designed for a particular group of qualified beneficiaries and contains information to help satisfy [the Act’s] notice provisions.”

The DOL has created three potential model notices:

1) The “General Notice (Full version) Plans subject to the Federal COBRA provisions must send the General Notice to all qualified beneficiaries, not just covered employees, who experienced a qualifying event at any time from September 1, 2008 through December 31, 2009, regardless of the type of qualifying event. This full version includes information on the premium reduction as well as information required in a COBRA election notice.”

2) “The Abbreviated General Notice: The abbreviated version of the General Notice includes the same information as the full version regarding the availability of the premium reduction and other rights under [the Act], but does not include the COBRA coverage election information. It may be sent in lieu of the full version to individuals who experienced a qualifying event during on or after September 1, 2008, have already elected COBRA coverage, and still have it.”

3) “Alternative Notice Insurance issuers that provide group health insurance coverage must send the Alternative Notice to persons who became eligible for continuation coverage under a State law. Continuation coverage requirements vary among States, and issuers should modify this model notice as necessary to conform it to the applicable State law. Issuers may also find the model Alternative Notice or the abbreviated model General Notice appropriate for use in certain situations.”

4) “Notice in Connection with Extended Election Periods Plans subject to the Federal COBRA provisions must send the Notice in Connection with Extended Election Periods to any assistance eligible individual (or any individual who would be an assistance eligible individual if a COBRA continuation election were in effect) who:

A. Had a qualifying event at any time from September 1, 2008 through February 16, 2009 [i.e., lost their job and/or medical coverage]; and
B. Either did not elect COBRA continuation coverage, or who elected it but subsequently discontinued COBRA.

Insomniacs can read these provisions of the Act in full at http://www.dol.gov/ebsa/pdf/COBRAPremiumReductionProvision.pdf. The Department of Labor published the new model COBRA notice on its website at http://www.dol.gov/ebsa/cobra.html.

IRS Explains Employers’ 2009 Payroll Tax Credit for Subsidizing COBRA Premiums for Terminated Employees.

On February 26, 2009, the Internal Revenue Service released information about how employers may claim credits against their quarterly payroll tax payments in order to subsidize continued medical insurance of terminated employees under COBRA pursuant to the American Recovery and Reinvestment Act of 2009. According to the IRS, “Form 941, Employer’s Quarterly Federal Tax Return, will also be sent to about 2 million employers in mid-March. The form is used to claim the new COBRA premium assistance payments credit, beginning with the first quarter of 2009.” The revised instructions for Form 941 will “explain how to complete lines 12a and 12b, which address the COBRA premium assistance payments.”

The IRS also announced that “[e]mployers must maintain supporting documentation for the credit claimed. This includes:
• Documentation of receipt of the employee’s 35 percent share of the premium.
• In the case of insured plans: A copy of invoice or other supporting statement from the insurance carrier and proof of timely payment of the full premium to the insurance carrier.
• Declaration of the former employee’s involuntary termination.”

Additional information is available from the IRS at http://www.irs.gov/newsroom/article/0,,id=204505,00.html, http://www.irs.gov/newsroom/article/0,,id=204709,00.html, and http://www.irs.gov/newsroom/article/0,,id=204708,00.html.

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with an attorney.

Government to Subsidize 65% of Medical Continuation Coverage for Involuntarily Terminated Employees

The recently enacted American Recovery and Reinvestment Act of 2009 (the “Act”) contains a provision where the federal government will partially subsidize the continuation of medical insurance coverage for involuntarily terminated employees for up to nine months if they are eligible for continued medical coverage under COBRA or similar state law. (Ohio has a mini-COBRA statute that applies to employers which are not otherwise covered by COBRA at Ohio Revised Code 3923.38). The continued medical coverage is available to any employee who participates in an employer-sponsored health plan and who is involuntarily terminated after September 1, 2008 but before December 31, 2009 – even if the employee did not initially elect to continue medical coverage after his or her termination.

The government is partially subsidizing the insurance coverage by requiring employers to pay for 65% of the monthly premium and then recoup that amount from the quarterly payroll and FICA taxes the employer would otherwise be required to pay. Of course, the employee has to elect to continue medical coverage under the new Act and pay his or her 35% share of the monthly premium before the employer can reimburse itself through payroll tax withholdings. If the employee already paid the 102% share of the premium (for months after February 17, 2009), the employer can either reimburse the employee for the 65% or credit the overpayment towards premium payments for the next two months. (The subsidy cannot be used for months prior to February 17, 2009). Employers will also need to file a report with the IRS concerning the involuntary termination of an employee covered by the new Act, the amount of the payroll taxes used to reimburse the employer for the 65% of medical insurance continuation and the Tax Identification Numbers of all covered employees. The IRS will issue regulations and other guidance concerning the form and content of such reports.

The employee may elect to continue the same insurance coverage which the employee utilized during active employment, or if the employer permits it, the employee may elect a less expensive medical plan if such plan is also offered to the employer’s active employees and such plan offers more than merely dental, vision, flexible spending or an on-site clinic at the employer’s facility.

The subsidy will not constitute taxable income to the employee, unless the employee’s adjusted gross income exceeds $125,000 (for single filers) or $250,000 (for joint filers). These high income employees may elect to waive the subsidy in order to avoid having the amount of their taxes increased by the full amount of the subsidized premium (or a significant fraction of that amount).

As mentioned, the government subsidy is available for up to nine months, but may terminate earlier when the employee becomes eligible (i) for COBRA coverage eighteen months earlier (i.e., the nine month subsidy does not extend COBRA’s regular 18-month eligibility period); (ii) under another employer’s medical plan, social security income or Medicare; (iii) for coverage under a flexible spending arrangement or (iv) for coverage for treatment that is furnished in an on-site medical facility maintained by an employer which consists primarily of first-aid services, prevention and wellness or similar care. Employees are required to notify employers if they obtain other medical coverage or risk a 110% penalty.

Employees who did not earlier elect continued medical coverage have 60 days to elect subsidized coverage once they receive the employer’s revised notice of eligibility. The revised notice of eligibility must be sent to any employees terminated between September 1, 2008 and December 31, 2009 and must notify recipients of:
• The availability of subsidized premiums for continued coverage;
• The option to enroll in different coverage (if the employer permits this option);
• The forms necessary for establishing eligibility for subsidized premiums;
• The name, address and telephone number necessary to contact the plan administrator and any other person maintaining relevant information in connection with the subsidized premiums;
• The extended election period (for employees who failed to timely elect COBRA coverage prior to February 17, 2009); and
• The employee’s obligation to notify the plan if the employee becomes eligible for other medical coverage or social security income and the penalty for failing to comply with this obligation;

The Department of Labor is required to publicize acceptable model notices by mid-March 2009 and employers are required to send by mid-April 2009 the revised notice to all employees involuntarily terminated since September 1, 2008.

Insomniacs can read these provisions of the Act in full at http://www.dol.gov/ebsa/pdf/COBRAPremiumReductionProvision.pdf. The Department of Labor expects to publish the new model COBRA notice on its website at http://www.dol.gov/ebsa/cobra.html.

NOTICE: This summary is designed merely to inform and alert you of recent legal developments. It does not constitute legal advice and does not apply to any particular situation because different facts could lead to different results. Readers should not act upon this information without legal advice. If you have any questions about anything you have read, you should consult with an attorney.