The American Rescue Plan Act (“ARPA”) was signed into law on March 11, 2021. ARPA included several provisions aimed at providing relief to employees and beneficiaries as a result of the COVID-19 pandemic. A major component of that relief was a requirement that employers sponsoring a group health plan had to offer COBRA coverage at no cost to qualifying individuals covered under such plans. In general, ARPA required employers to pay the costs of COBRA coverage for a six month subsidy period (April 1, 2021 to September 30, 2021) for employees and their qualified beneficiaries, collectively known as Assistance Eligible Individuals (“AEIs”).
In addition to providing the subsidy, ARPA required employers, insurers, and plan administrators to distribute a notice to all AEIs by May 31, 2021, informing them of the subsidy along with other information.
Another Required Notice
ARPA also requires a notice be sent to AEIs receiving subsidized coverage, informing them that their subsidy is set to expire. A notice must be provided at least 15 days and no more than 45 days before the expiration date of the subsidy. As a result, most AEIs will need to be given a notice between August 16, 2021 and September 15, 2021 notifying them that their COBRA subsidy will end, which generally occurs for most individuals on September 30, 2021. However, if an AEI’s subsidy period ends before September 30th (if, for example, as a result of their 18-month (or 36-month if due to a disability) maximum COBRA coverage period ending prior to September 30, 2021), then the notice must be sent sooner, but within the 15 to 45 day distribution window.
Please note that the September 30th deadline does not apply to all AEIs. The general rule is that the COBRA subsidy expires on the earliest of (1) the first date the AEI becomes eligible for other group health plan coverage (with certain exceptions) or Medicare coverage, (2) the date the AEI ceases to be eligible for COBRA continuation coverage, or (3) the end of the last period of coverage beginning on or before September 30, 2021. The notice is not required if an AEI’s subsidy ends as a result of becoming eligible for coverage under another group health plan or through Medicare.
Employers, plan sponsors, and insurers should determine when subsidy periods are set to expire for covered AEIs and timely distribute the required notice. Thankfully the Department of Labor (“DOL”) has provided a model notice and although not required to be used, the DOL considers its use as good faith compliance with the notice requirements under ARPA.
If you have any questions about this Alert, please feel free to call (919.781.4000) or e-mail your Wyrick Robbins contact or one of the following members of our Employee Benefits and Executive Compensation group: San Parikh (email@example.com), or Jim Hoch (firstname.lastname@example.org).
The Employee Benefits & Executive Compensation practice group at Wyrick Robbins Yates & Ponton publishes Client Alerts periodically as a service to clients and friends. The purpose of this Client Alert is to provide general information, and it is not intended to provide, and should not be relied upon as, legal advice.