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  • Paul F. Keneally

COBRA Subsidy Provided by the American Rescue Plan Act of 2021

Recently passed by Congress and signed by President Biden, the American Rescue Plan Act of 2021 (ARPA) provides employees who are involuntarily terminated, or whose hours are reduced voluntarily or involuntarily, with up to six months of subsidized COBRA coverage. Generally, employers will have to front the COBRA premium subsidy and will be reimbursed by the federal government through a refundable tax credit against the employer’s Medicare tax. The ARPA COBRA subsidy is available between April 1, 2021 and September 30, 2021, but may also apply to those whose employment ended as far back as November 1, 2019 as it applies to those whose initial COBRA period ends or would have ended if COBRA were elected/did not lapse during or after that six month period. The standard 18-month COBRA period for most people is not extended by this new law. Where the 18-month COBRA period ends before September 30, 2021 or starts after April 1, 2021, the subsidy will end up being less than six months. Excluded from the right to the subsidy are those terminated for gross misconduct as found by a judicial or administrative body, those who resign, those eligible for other group coverage, and those eligible for Medicare.


Beyond the substance of the law, the trickiest part of the new subsidy requirement is the obligation employers will have to review their files and determine who among those terminated since November 1, 2019 may be eligible for the subsidy. Notice will need to be sent by May 30, 2021 regarding the benefit and the special enrollment period available. The federal Department of Labor (DOL) has been directed by the new law to provide model notices by April 11, 2021 for employer use and standard COBRA notices will also need to change. Employers are encouraged to consult with their accountants about the tax credit procedure and, lastly, be mindful of how the new subsidy will work with any existing COBRA funding they may do such as in severance plans or agreements or retirement programs. It is expected the DOL will issue guidance/regulations regarding the subsidy in the coming days.


If you have any questions regarding the issues discussed above or if you have any other Labor & Employment Law concerns, please contact the Underberg & Kessler attorney who regularly handles your legal matters or Paul Keneally, the author of this piece, here or at (585) 258-2882.

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