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In response to COVID-19’s upending of your businesses and your former employees’ lives, congress has passed new legislation that provides a 100% paid subsidy of COBRA insurance premiums. This impacts employees who have incurred a reduction in hours or involuntary termination of employment due to the pandemic, and for their covered dependents, allowing them to stay on their company-sponsored health plans, under the American Rescue Plan Act (ARPA) stimulus bill.
Federal COBRA applies to firms with 20 or more employees. It allows terminated employees to continue their group health insurance generally for up to 18 months or 36 months for special circumstances.
California mandates Cal-COBRA, which applies to companies of 2 -19 employees that have group health plans (up to 36 months coverage) and to people who’s Federal COBRA has expired. It gives those covered by Federal COBRA an additional 18 months of coverage once COBRA has expired.
Effective April 1st to September 30th 2021, employers will receive the subsidy, to be passed along to COBRA enrollees, through a payroll tax credit against employers’ quarterly taxes. The impact of the subsidy on Cal-COBRA is currently unclear.
What You / Your HR Dept. Should Do
Employers need to inform individuals about the subsidy, when the aid terminates and if their subsidy will end before Sept. 30, 2021. This notice will not be required if their subsidy is ending due to the individual’s eligibility for other coverage. The ARPA will require employers to amend COBRA notice forms by including as a separate document information including:
- The forms necessary for establishing eligibility for COBRA premium assistance.
- The name, address and telephone number necessary to contact the plan administrator and any other person maintaining relevant information in connection with premium assistance.
- A description of the extended election period provided by the legislation.
- A description of the option to enroll in different coverage, if adopted by the employer.
When using third-party COBRA administration, the administrator should manage election changes, notice requirements and billing, but ultimately the employer is responsible for compliance, so confirm that your administrator is well-informed and the updates have been implemented. Third-party administrators will also depend on employers to report terminated employees and beneficiaries who may be newly eligible for the special election and subsidy.
This new bill can present tremendous administrative and compliance challenges. To ensure a smooth transition and adhere to federal guidelines develop a proactive plan for communicating to assistance eligible individuals, making those communications, and keeping good records of them to demonstrate fiduciary compliance is essential.
To our clients, please don’t hesitate to contact us if you need any assistance or have questions about this process.
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