COBRA and continuation subsidy requirements under the American Rescue Plan Act ARPA

These are employees and their dependents who enrolled in continuation coverage and have one of the following qualifying life events that caused them to lose group health coverage:

• Involuntary termination or
• Reduction of hours involuntary or voluntary

It also includes employees and their dependents with the above qualifying life events who did not enroll in or dropped continuation coverage as of Apr 1, 2021–so long as:

• Had they enrolled in continuation/COBRA, their 18 months of coverage would extend into the subsidy period Apr 1–Sep 30 and are not eligible for other group coverage or Medicare; or
• They dropped their continuation COBRA coverage but are still eligible for it and are not eligible for other group coverage or Medicare

Dependents, limited to the employee’s spouse and children, are eligible if the employee experienced one of the previously detailed QLEs, causing the dependent to also lose coverage.

Examples of non-eligible QLEs include: 

• An employee quitting their job
• A dependent aging off of the plan, a death, or a divorce.
• Individuals who are eligible for other group coverage or Medicare regardless of enrollment. 
  • Other group coverage includes a new employer’s plan or a spouse’s plan.

Assistance eligible individuals who want to receive premium assistance must submit their “Request for Treatment as an Eligible Individual” with their election forms. The form must be submitted within 60 days of receipt of the subsidy notices. 

Any other extension of elections provided under COVID-19 relief is not applicable for electing the subsidy. This subsidy does not extend the time period of continuation coverage, and the overall continuation period end date will be based on the date of the original QLE occurred and not the date of the election for assistance.

• Reach out to your employer who is usually the plan sponsor, or carrier letting them know you believe you’re qualified.
• Within 60 days of receiving notices, fill out the “Request for Treatment as an Eligible Individual” form stating that you’re eligible with your election and return to your employer or carrier whoever is listed as the contact on the form. 
  • Reminder: there may be additional obligations for receiving assistance. Your employer, carrier, or COBRA administrator will send you the Summary of Provisions and additional notices, which include the applicable forms. 
  • If you have state continuation and Gusto brokers your employer’s benefits, the additional documents may be included in the Gusto notification you receive if your QLE happens after April 1, 2021.
• If you become eligible for other group health coverage or Medicare regardless of if you enroll, you’re no longer eligible for assistance. You’re required to inform your employer or COBRA administrator of this new coverage and will no longer be eligible to have your premiums subsidized.
  • Failure to notify your employer or COBRA administrator may result in you facing a penalty.

Who's responsible for subsidizing premiums?

Generally, employers will be responsible for paying for an assistance eligible individual’s premiums during the required subsidized time period. This includes employers subject to federal COBRA and employers subject to state continuation. 

• If your COBRA administrator pays for COBRA premiums, they can offer more guidance as to how your subsidization requirements work. 

If you're an employer and the carrier in your state must comply with state continuation rules not plan sponsor or employer–such as California–the carrier will be responsible for paying premiums.

What happens if the employer doesn't subsidize premiums?

If an employer doesn’t subsidize premiums for assistance eligible individuals, they’ll owe them the premiums for the months they should have been receiving assistance. There's also a risk of civil penalties from the IRS or the Department of Labor for non-compliance.

The employer must reimburse the eligible individuals for premiums within 60 days of an erroneous payment. 

Employers or their COBRA administrators are required to send out specific notices to assistance eligible individuals and qualified beneficiaries.

• Important: failure to send out required notices will result in an excise tax of $100 per qualified beneficiary up to $200 per family for each day the notice is late. 

If you’re using a COBRA administrator, contact them directly to determine whether they’ll be supporting notice requirements and how.

The 5 required notices

1. General notice about the subsidy for employers subject to federal COBRA–employers subject to federal COBRA should utilize this notice. 
   • The notice informs COBRA-eligible employees that this subsidy may be temporarily available to them. 
   • It can be provided along with the regular federal COBRA notice for qualified beneficiaries who have a QLE between Apr 1–Sep 30 of 2021. 
   • This must be sent within 30 days of the QLE that made the qualified beneficiary eligible for COBRA.
2. Alternative General Notice for State Continuation/Mini-COBRA Employers–employers subject to state continuation must send this notice to qualified beneficiaries. 
   • It can be provided along with any other notifications required under the state for qualified beneficiaries who experience a QLE from Apr 1–Sep 30 of 2021. 
   • This must be sent within 30 days of the QLE, unless the state continuation rules require an earlier notification. 
3. Summary of provisions, including the form for an individual to state they are an assistance eligible individual.
   • The notice informs individuals that if they become eligible for other group coverage or Medicare, they’re no longer eligible for the subsidy and need to inform their employer or COBRA administrator, if applicable. 
   • This should be included with the general notice for federal COBRA or the alternative notice if subject to state continuation. 
4. Extension notice
   • This notice must be provided to qualified beneficiaries who are considered assistance eligible individuals and are currently enrolled, or would have been eligible to enroll in or maintain COBRA/continuation if they had elected such or had not dropped coverage. 
     • These are individuals who are still within their COBRA window or state continuation window as of  Apr 1, 2021. 
   • The notice must be sent by May 31, 2021.
   • Qualified beneficiaries have 60 days from receipt to elect.
     • If the notice is sent before May 31, the beneficiaries still only have 60 days from receipt to elect. 
   • Beneficiaries who enroll in continuation and elect the subsidy will only be enrolled as of Apr 1, 2021 or the time of their election, and not back to their original QLE date. 
     • Example: if an employer must comply with Pennsylvania state continuation requirements, continuation only lasts for 9 months, so:
       • An employee who was involuntarily terminated on May 1, 2020 will not be eligible for the subsidy because their continuation should have ended as of Feb 1, 2021. The employee will not receive any extension under the ARPA. 
       • If the employee was terminated on Sep 1, 2020, their coverage would not end until Jun 1, 2021 but they would only be eligible for assistance for April and May of 2021.
         • This individual would also need to receive the below expiration notice, due to their premium assistance ending before Sep 30, 2021.
5. Expiration Notice
   • This informs an assistance eligible individual that their premium assistance is ending before Sep 30, 2021. This notice informs them as to if they may be eligible for unsubsidized continuation coverage if they are still within their coverage period, Medicaid, or that they may have a QLE to enroll in the individual marketplace. 
   • This notice doesn’t need to be sent to assistance eligible individuals who become/are eligible for other group health coverage or Medicare, and are for those reasons no longer eligible for the subsidy.
     • Instead, the participant must inform you that they are no longer eligible for the subsidy so you no longer have to front the premiums. This is true regardless of if the participant actually enrolls in other group coverage.
   • This notice must be provided 15 to 45 days before an assistance eligible individual’s premium assistance ends, if ending before Sep 30, 2021. 

If another broker manages your benefits, reach out to them to understand whether your company is liable for Federal COBRA or state continuation.  

If your benefits are managed by Gusto:

1. Sign in to your Gusto admin account.
2. Go to the Benefits section.
3. Click on your medical plan.
4. View the “Continuation status” on the right side of the page. 
   • This will show if you’re subject to Federal COBRA or State Continuation and if you’re set up with BASIC Pacific. 
   • Important: your account lists your current continuation status. If your company size changed in 2020, you may have a different status this year compared to last year. If you’d like to confirm a previous company status, please contact us. 

If you believe this information is incorrect, contact us at [email protected]. If you wish to learn more about your state continuation rules, visit your state government's website.

• BASIC will handle the required notices for anyone dismissed during their administration and will provide you with reports to facilitate the declaration of tax credits. 
• Check for additional communications from BASIC 
• For questions, reach out to [email protected] or call 916 303-7100.

Contact your COBRA administrator to see what reporting they can provide you and if they’ll be handling the temporary requirements under ARPA. 

Employers subject to state continuation are also required to comply with premium assistance under ARPA. Read below to learn more about your obligations and other critical information.

1. You’re responsible for sending out the “Extension Notice” detailed above by May 31, 2021.
   • Review your dismissed employees and employees with a reduction in hours to determine if any qualify for the extension notice–if you need help contact [email protected].
     • Gusto can support you in finding out who may be an assistance eligible individual but ultimately employers are responsible for compliance.
     • The accuracy of any Gusto reporting is dependent on the employer’s length of service with Gusto, how long benefits have been brokered with Gusto, and any gaps that may exist in the information. Gusto does not guarantee these reports are fully correct and employers are responsible for making the final determination on who needs to receive notices. 
2. For employees who experience a QLE after Apr 1, 2021, Gusto will include required ARPA information as detailed by the “Alternative Notice” requirements. Gusto will also include the Summary of Provisions for employees to elect premium assistance.
   • You’ll need to determine if employees or qualified beneficiaries are eligible based on the coverage date and QLE submitted on the “Request to be treated as an assistance eligible individual” form that should be submitted to you. 
3. You’re responsible for sending the “Expiration Notice” detailed above if the continuation participant’s assistance expires before Sep 30, 2021–this must be sent 15 to 45 days before assistance expires. 

Heads up

If your company is located in one of the states listed below and state continuation applies, your insurance carrier may be responsible for the notifications and subsidization of continuation premiums. Contact your carrier directly for more information.

• States: California, Florida, Georgia, Kansas. Kentucky, Maine, Mississippi, New Hampshire, Oklahoma, Oregon, and West Virginia.

If your company is located in and has its plans written out of one of the following states, you’re likely not required to abide by ARPA’s subsidization requirements–likewise, you’re also not likely to be able to receive a tax credit for offering the subsidy since you aren’t subject to the ARPA requirements.

• States: Alabama, Alaska, Hawaii, Idaho, Indiana, Michigan, Montana, and Nevada.

Contact your broker to see if your company is obligated to meet the temporary requirements outlined by the ARPA. If so, work with your broker and COBRA administrator to determine what support they’re offering and if they’ll be notifying employees as required. Find out if they’re able to help with reporting as well–it’ll be helpful for those quarterly tax filings.

If you need help determining which individuals are assistance eligible, contact [email protected]. We’re building a report that will help us walk you through determining who's eligible.