How to Comply with the American Rescue Plan Act’s COBRA Requirements

COBRA law requires that employers with group health plans offer covered employees the right to continue coverage for 18 months in cases where coverage would otherwise end, such as after termination of employment or a significant reduction of hours of employment that results in loss of coverage. 

The American Rescue Plan Act (ARPA) of 2021 provides workers with a variety of benefits, including subsidized continuation coverage. For fully insured plans, employers are required to pay 100% of the health plan’s COBRA coverage costs on behalf of the enrollees. The ARPA subsidy covers COBRA costs incurred between April 1 and September 30, 2021.

Eligibility

Eligible individuals include covered employees whose employment was involuntarily terminated, or whose hours of employment were reduced to the point of losing coverage, beginning at any time since November 1, 2019.  

A worker who was eligible for COBRA during that period but waived it, or who chose coverage and then dropped it within the 18-month eligibility period, may now enroll and take advantage of the ARPA subsidized coverage. 

Employer Requirements 

The ARPA requires employers to offer free COBRA coverage to eligible individuals and provides tax credits to offset 100% of the employer’s COBRA costs. Employers can claim the tax credit against their quarterly Medicare payroll tax. A refund may be claimed if the amount of the credit exceeds the employer Medicare taxes due in a calendar quarter. 

Employers and their plan administrators are required to identify eligible individuals and notify them of their rights under the ARPA, not later than May 30, 2021. The eligible individual is then allowed 60 days to elect the COBRA coverage. 

The Department of Labor has issued a summary of the major provisions that the employer can provide qualified beneficiaries. 

The knowledgeable staff at Michigan Beverage Collective is providing members with the information they need to comply with the new legislation and file for the payroll tax credit. It’s one of the many perks that come with choosing the Collective as your benefits administrator. If you have any questions about COBRA requirements or any other aspect of employee benefits, contact Katie Gray for more information.