~ Author – Cole Beehner, CPA, Deluzio & Company, Partner ~
The American Rescue Plan Act of 2021 (ARPA), signed into law on March 11, 2021, provides for a 100% COBRA subsidy funded through employer tax credits.
Employees enrolled in an employer’s group health plan may lose coverage if the employee’s hours are reduced or employment is terminated. For group plans subject to the federal COBRA rules, the employee can elect to continue coverage under the group plan by paying the premium out of pocket.
The ARPA provides a 100% COBRA subsidy to employees whose work hours were reduced, or their employment was terminated, if that reduction or termination was involuntary. The subsidy applies for a maximum of up to six months of coverage from April 2021 through September 2021, depending on when the employee’s COBRA period expires. Employees terminated earlier than April 1, 2021, but who are still in their COBRA election period are still eligible for this subsidy. The employer will be required to pay the COBRA premium for the employee, but then will be reimbursed through a refundable payroll tax credit.
Employers will need to work with their group health insurance providers to properly administer their COBRA coverage under these new provisions.
If you have questions about this or other aspects of the ARPA, please feel free to contact our office.