DOL Releases FAQs About American Rescue Plan’s COBRA Subsidy

Highlights

• Coverage is Retroactive: Individuals may start their subsidized coverage April 1, 2021, even if they make their election at a later date.
• Violations Subject to Penalty: Failing to satisfy the ARP COBRA requirements may result in a tax of $100 per qualified beneficiary per day to employers and plans.
• Family Members May Newly Elect COBRA: Each COBRA qualified beneficiary may independently elect COBRA continuation coverage.

Important Dates

• April 1, 2021: ARP COBRA subsidy began.
• Sept. 30, 2021: ARP COBRA subsidy ends.

On April 7, 2021, the U.S. Department of Labor (DOL) answered frequently asked questions (FAQs) about the American Rescue Plan Act’s (ARP) premium assistance for health insurance continuation coverage under the Consolidated Omnibus Budget Reconciliation Act of 1986 (COBRA) and similar state mini-COBRA programs. The DOL’s FAQs are available to download here.

The FAQs

The DOL’s new guidance on the COBRA subsidy consists of 21 FAQs, clarifying:

• New plan notice requirements for the subsidy;
• The applicability of the ARP election extension; and
• That extended deadline relief under earlier federal guidance does not apply to the ARP’s COBRA notice and election time frames.

However, the FAQs explain that the prior COBRA deadline relief does apply to an individual’s eligibility to elect the COBRA subsidy based on an earlier qualifying event.

The ARP Subsidy

The ARP provides a 100% subsidy of COBRA premiums for eligible individuals who lost group health coverage due to a reduction in hours or involuntary termination of employment. The subsidy applies from April 1, 2021, through Sept. 30, 2021, and it is available to eligible qualified beneficiaries even if they earlier declined or dropped COBRA coverage.

Action Steps

Employers should review the DOL’s FAQs to ensure compliance with the ARP, especially with respect to new plan notice obligations.