On July 26, 2021, the IRS issued Notice 2021-46 (the “Notice”), which provides new guidance in the form of 11 questions and answers on the COBRA premium subsidy and the related tax credit under the American Rescue Plan Act of 2021 (“ARPA”). The Notice expands on previous guidance provided under Notice 2021-31. Read our recent QuickStudy.
As background, ARPA provides certain COBRA eligible individuals who elect COBRA coverage due to a loss of group health plan coverage as a result of an involuntary termination of employment or reduction in hours with a COBRA premium subsidy equal to the full cost of coverage. The COBRA premium subsidy is available from April 1, 2021, through September 30, 2021.
The Notice provides helpful clarifications on the following points:
The Notice clarifies that COBRA premium assistance is available to assistance eligible individuals who are entitled to elect COBRA coverage for an extended period if the extended period falls between April 1, 2021 and September 30, 2021. An assistance eligible individual may be eligible for extended COBRA coverage due to a disability determination, second qualifying event or an extension under State mini-COBRA laws. This is the case even if the individual has not notified the plan or insurer of the intent to elect extended COBRA coverage before the start of such period.
The Notice clarifies that if an assistance eligible individual elected COBRA continuation coverage for dental-only or vision-only coverage, COBRA premium assistance ends when the AEI becomes eligible for coverage under any other disqualifying group health plan or Medicare, even if the other coverage does not include all of the benefits provided by the previously elected COBRA continuation coverage. For example, eligibility for Medicare will end eligibility previously elected dental-only or vision-only COBRA coverage even though Medical generally does not provide vision or dental coverage.
The Notice confirms that a State program does not fail to provide comparable coverage to
Federal COBRA continuation coverage solely because the program covers only a subset of State residents (for example, only employees of a state or local government). Thus, COBRA premium assistance is available to assistance eligible individuals enrolled in State mini-COBRA programs, as long as the program provides coverage otherwise comparable to Federal COBRA.
The Notice provides additional clarification on the entity that may claim the tax credit:
In the case of a business reorganization (i.e., acquisition or sale), if the selling group remains obligated to provide COBRA coverage after the business reorganization, the entity in the selling group that maintains the group health plan, and not the common law employer (which may be an entity in the buying group) is the premium payee entitled to claim the COBRA premium assistance tax credit.
The post IRS Provides Additional Guidance on COBRA Premium Subsidy appeared first on Employee Benefits.
Visit our Employee Benefits Blog for the latest news and developments.Visit the blog
Sign up for our newsletter and get the latest to your inbox.