The end of the ARPA COBRA subsidy is drawing near. Under the law, the subsidy applies until the earliest of:
- the date the AEI becomes eligible for other group health coverage or Medicare,
- the date the AEI ceases to be eligible for COBRA, or
- end of the last period of coverage beginning on or before September 30, 2021.
Employers and plan administrators are required to provide subsidy termination notices to Assistance Eligible Individuals (AEI) before they lose the subsidy.
Who receives the subsidy termination notice?
The termination notices must be provided to AEIs who lose the subsidy due to the expiration of their COBRA coverage period, e.g., 18, 29, or 36 months. Also, the termination notice must be provided to AEIs who are still receiving the subsidy, alerting them the subsidy will expire. The notice is not required for COBRA participants who are no longer eligible for COBRA because they obtained coverage under other group health plans/Medicare.
What information must the notice include?
The notice must be written in clear and understandable language and must explain that the:
- subsidy for the individual will expire soon and prominently identify the date of such expiration, and
- the individual may be eligible for coverage without the subsidy under COBRA or under another group health plan.
When is the subsidy termination notice due?
The notice must be provided no more than 45 days and no less than 15 days before the subsidy expiration date. For those AEIs who have not already lost the subsidy, employers and plan administrators must provide notice to assistance eligible individuals (AEIs) informing them the subsidy will expire. For employers whose COBRA coverage periods end on September 30, 2021, the subsidy expiration date is September 30, 2021, and notices must be provided between August 16, 2021, and September 15, 2021. If the COBRA coverage begins in September and ends in October, the notice should be provided 15 – 45 days before the end of the last period of coverage. For example, the employer has a bi-weekly period of coverage and in September 2021, the last period of coverage is September 19, 2021 – October 2, 2021. The entire coverage is eligible for the subsidy even though the coverage includes coverage for October 1 & 2. In this example, the notices should be provided 15 – 45 days before October 2, 2021.
What is next for COBRA after the subsidy ends?
Employers and plan administrators will revert to pre-subsidy COBRA administration. This includes contending with the relief (e.g., Outbreak Period relief) for certain deadlines that fall on or after March 1, 2020. See our prior article about the extended deadlines. The President has not announced the end of the COVID-19 pandemic so the extended deadlines live on.
Some AEIs have lost the extended COBRA deadline to enroll retroactively and must be handled differently. According to IRS Notice 2021-31 (QA-56 & 59), if an AEI was eligible to enroll in COBRA retroactively to their original qualifying event date because of the deadline relief, but instead elected to enroll in COBRA and the subsidy effective on or after April 1, 2021, they lose their right to retroactively enroll in COBRA. Effective October 1, 2021, employers and plan administrators will need to carefully determine which qualified beneficiaries are eligible to retroactively enroll in COBRA due to the extended COBRA deadlines.
Interestingly, the model DOL notice did not indicate the loss of an AEI’s right to retroactive coverage under the above circumstances. The IRS subsidy guidance (Notice 2021-31) was published right before the COBRA subsidy notices were supposed to be provided to AEIs. More than likely, many subsidy notices did not include this information. TRI-AD included this information in our subsidy notices.
Example: if an AEI was involuntarily terminated and their COBRA enrollment deadline was February 15, 2021, because of the deadline relief, they have up to February 15, 2022 to retroactively enroll (possibly sooner if the President announces the end of the pandemic). If they did not enroll in COBRA before April 1, 2021, but enrolled in COBRA and the subsidy effective April 1, 2021, they lose their right to retroactively enroll back to their qualifying event date.
Employers and plan administrators should be planning on providing AEIs with the subsidy termination notices by the deadline. It may be best to wait until closer to the deadline in case Congress extends the subsidy. TRI-AD is not aware of any pending bills with an extension, however.
TRI-AD is prepared to provide AEIs with the subsidy termination notices and resume pre-subsidy COBRA administration after September 30, 2021. Of course, we are not back to normal COBRA operations until the announcement of the end of the pandemic. Unfortunately with the COVID-19 variants, this may not happen soon enough.
Visit our COVID-19 webpage for more information.
TRI-AD and our Associates’ suggestions or recommendations shall not constitute legal advice. No content on our website can be construed as tax or legal advice and TRI-AD may not be considered your legal counsel or tax advisor. Clients are encouraged to consult with their tax advisor and/or attorney to determine their legal rights, responsibilities, and liabilities. This includes the interpretation of any statute or regulation, federal, state, or local; and/or its application to the clients’ business activities.