New Temporary COBRA Assistance Law 

(April 9, 2021)

On March 11, 2021, President Biden signed into law the American Rescue Plan Act (ARPA). In addition to extending and expanding paid sick and family leave related to the COVID-19 pandemic, the ARPA also imposed new duties on employers with regard to health insurance benefits for certain employees.

The ARPA requires employers to cover 100% of COBRA health insurance premiums from April 1, 2021 through September 30, 2021 for former employees who:

  • (1) Became COBRA-eligible on or after November 2019;
  • (2) Lost employer-sponsored health insurance because of an involuntary termination of employment or because of an involuntary reduction in work hours; and
  • (3) (a) Elected COBRA continuation coverage, (b) Elected COBRA but let the coverage lapse, or (c) Did not elect COBRA.

Former employees are not eligible for the new COBRA subsidy if they:

  • (1) Resigned voluntarily, or voluntarily reduced their hours;
  • (2) Were terminated from employment for gross misconduct;
  • (3) Are now covered under another group health plan, or
  • (4) Are Medicare-eligible.

If COBRA coverage is supposed to expire before September 30, 2021, the new law does not extend the expiration date, but there are some issues that are not yet resolved. The U.S. Department of Labor (USDOL) is currently drafting regulations that may help answer them. The USDOL is supposed to issue new model COBRA notices regarding these scenarios any day now.

Employers are supposed to be able to claim a refundable payroll tax credit equal to the value of the COBRA premiums provided.

Employers with COBRA-eligible employees should contact their health plan administrators to evaluate how the ARPA may affect their COBRA obligations.