The American Rescue Plan Act of 2021
You’ve perhaps heard by now that The American Rescue Plan Act of 2021 (ARPA) provides COBRA participants with a subsidy that covers 100% of health insurance premiums. It also makes changes to Dependent Care FSA programs. At Relational Advisors, we are working with our clients and their vendors to help advise them on the administrative and communications requirements of the law. If you need any assistance in this arena, be sure to reach out to us! Here’s a quick overview of the changes.
Recap on COBRA Changes
Employers will be required to advance the premiums payments to the insurance companies while suspending premium collection from participants, thus creating the subsidy.
Subsidies will be reimbursable to employers in the form of Medicare payroll tax credits, as reported on quarterly payroll tax credits. The process has yet to be completely defined but we expect the process to be similar to the reimbursement of emergency paid sick leave and emergency family and medical leave.
The subsidized term runs from April 1 through September 30, 2021 and applies to any individual COBRA plan that overlaps this period of time. It does not extend the maximum period of coverage. Employers will need to issue refunds for any COBRA payments made by eligible individuals during the subsidy period.
The subsidy is not voluntary. Employers will need to identify subsidy-eligible individuals and communicate the information in a timely manner.
The subsidy applies to group health plans subject to federal and state COBRA coverage. This should include medical, dental, and vision coverage, but more clarification will be provided. The ARPA expressly excludes health savings accounts of any type.
Individuals are eligible only if s/he involuntarily lost coverage due to termination of employment or reduction in hours and the individual’s COBRA coverage period overlaps with the subsidy term. Eligible individuals also include spouses and dependent children covered by COBRA plans.
An individual loses subsidy eligibility when the individual obtains new group health coverage; when the COBRA coverage period ends; or September 30, 2021.
We are hosting calls with our clients and COBRA vendors to get up to date information. If you would like support and information on how to manage this and the other changes (Dependent FSA, etc.) give us a call at 866-449-2002, and we’d be happy to help!
Information is provided by Relational Advisors and written by Mike Rankin, a non-affiliate of Cetera Advisor Networks LLC.