Q: I was terminated in August 2020, and never elected COBRA. Can I enroll now and receive the subsidy for the months April through September, without paying premiums due back to August 2020?
A: Yes. Under the ARPA, qualified beneficiaries that were involuntarily terminated and are still within their 18 month COBRA period can elect COBRA under a 60 day special enrollment window. This window allows individuals to elect COBRA beginning April 1, 2021 and receive the subsidy until September 30, 2021, or for as long as their 18 month period lasts, or until they receive an offer of other group coverage. The 18 month period is still measured from the date of the COBRA Event. The ARPA also allows a prospective enrollment, meaning no back premiums are required to have COBRA reinstated as of April 1, 2021. There will be a gap in coverage if no back premiums are paid between the COBRA event date (or date of last COBRA premium) and April 1, 2021.
Q: I resigned from employment in December 2020, and am enrolled in COBRA through my former employer. Will I receive the subsidy?
A: No. If the resignation was completely voluntary, this individual is not eligible for the subsidy. Only terminations deemed involuntary are subsidy eligible.
Q: I took leave to care for my ill family member and was not able to return to work when the leave ended. My employer then terminated me. I enrolled in COBRA in October, 2020.
Am I eligible for the subsidy?
A: Yes. Under the guidance from the 2009 COBRA subsidy program, terminations of employment following leaves of absence are considered ‘involuntary’ for purposes of the subsidy. Unless new guidance changes the existing rules, this type of termination would be considered involuntary.
Q: I was laid off in November 2020. I elected single COBRA coverage. I had a baby in January 2021, can I change my election to family coverage and still receive the subsidy?
A: Yes. HIPAA life events enable qualified beneficiaries to change their existing COBRA elections outside of the employer’s open enrollment. Certain events, such as the birth of a child or placement of a child for adoption, will enable the qualified beneficiary to change COBRA plan tiers and receive the subsidy for the new tier. Note that other life events such as marriage, would enable the individual to add the new spouse to the COBRA coverage BUT WOULD NOT enable the individual to receive the subsidy for the spouse’s coverage.
Q: We have 10 employees that were laid off last fall. As part of their severance, we have agreed to pay their COBRA premiums until October, 2021. Can we claim a tax credit under the ARPA for these premiums during the period between April and September, 2021?
A: Tax credits are available for employers that are required to pay COBRA premiums under the ARPA. COBRA premiums already agreed to be paid outside of the ARPA, and not on account of the ARPA, do not appear to be eligible for this federal tax credit.
Q: We hire contract employees for different periods of time. These employees are full time for their course of employment, and enrolled in benefits. When their contracts expire, if we do not hire them for an additional or new contract, would they be eligible for the ARPA subsidy?
A: The 2009 guidance indicates “an involuntary termination could include the employer’s failure to renew a contract at the time the contract expires, if the employee was willing and able to execute a new contract providing terms and conditions similar to those in the expiring contract and to continue providing the services.” Unless we receive new or different guidance, it is safe to assume such an individual would be eligible for the subsidy.
Q: I was terminated in December 2019. Do I qualify for the subsidy?
A: Yes. The ARPA indicates individuals that are still within their 18 month federal COBRA window as of the laws effective date of April 1, 2021 are eligible for the subsidy (18 months from April 2021 is November 2019). The COBRA duration is not extended, so someone terminated in December 2019 would be eligible for the subsidy for the months of April 2021 and May 2021
Q: At the time of my termination I was enrolled in my employer medical plans and their dental plan. Does the subsidy apply to both of these plan premiums?
A: Yes. The ARPA COBRA subsidy applies to Medical, dental, vision, HRA and EAP and wellness plans when they provide ‘medical care’. It does not apply to FSA plans. Employees can only elect coverage for plans they were already enrolled in upon terminations, they cannot add dental or vision for example unless they had these plans when they were terminated.
IRS Circular 230 disclosure: To ensure compliance with requirements imposed by the IRS, we inform you that any tax advice contained in this communication, unless expressly stated otherwise, was not intended or written to be used, and cannot be used, for the purpose of (i) avoiding tax-related penalties under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any tax-related matter(s) addressed herein.
Heffernan Employee Benefits Health Care Reform, ERISA, and HR Alerts are published as an information source for our clients and colleagues. It is general in its nature and is not intended to be and should not be used as a substitute for specific legal advice.