American Rescue Plan Act: COBRA Subsidy


On March 11, 2021, President Biden signed into law the American Rescue Plan Act (ARPA), which includes a new COBRA subsidy. The Act will impact qualified COBRA beneficiaries and provide more relief for Americans impacted by COVID-19. Employers will be required to act swiftly.

Here is a summary of everything you need to know about the subsidy.


COBRA Subsidy Requirements

The ARPA provides a 100% COBRA subsidy for qualified individuals. Employers will receive a credit for the premiums of qualified individuals in the form of a payroll tax credit.

The subsidy is available for:

  • Anyone who lost coverage due to an involuntary termination
  • Anyone who lost coverage due to a reduction in hours
  • Anyone who is not eligible under another group health plan or Medicare.


COBRA Subsidy Timeline

The subsidy will be effective April 1, 2021 – September 30, 2021. Please note: the subsidy also applies to anyone whose 18-month federal COBRA eligibility period includes April 1, 2021.

For example, let’s say an individual was terminated in October 2019 and their COBRA eligibility began November 1, 2019. They would be eligible for the subsidy because it is within the 18 months of their eligibility period.


Employer Requirements

Under ARPA, plan sponsors are required to send a notice to all eligible members by May 31, 2021. The notice must inform eligible participants of the subsidy and provide them with an opportunity to enroll effective April 1, 2021. If you need assistance, contact P&A Group.


Deadlines & the End of the Relief Period

On May 4, 2020, the DOL and the IRS released joint guidance announcing the extension of certain deadlines for affected members to make COBA elections as well as payments during the Outbreak Period.


What is the Outbreak Period?

Effective March 1, 2020, the Outbreak Period defines the period of time during which the ERISA deadlines are suspended. Originally, the Outbreak Period could only be effective for one year or until February 28, 2021. However, Notice 2021-01 clarified the application of the Outbreak Period can be:

  • One year from the date the individual was eligible for relief or;
  • 60 days after the announced end of the National Emergency, whichever is earlier.

The end of the National Emergency has not yet been declared. Once it’s announced, it will start the 60-day clock for anyone who has not yet passed one year from their eligibility date.


Employer Requirements

Employers are required to send notices to all affected members. The notices must inform members of the end of the relief period, as well as their deadlines to enroll. Deadlines are determined on a case by case basis (the earlier of one year from their eligibility date OR 60 days after the end of the National Emergency). For assistance with these notices, please contact P&A Group.


P&A Group COBRA Administration Services

The notice requirements and COBRA subsidy can be complicated, but P&A Group COBRA administration will completely manage the new requirements for employers. Our services include full liability for all of the mailings – giving employers peace of mind that they are in compliance with the DOL. To learn more, please contact P&A Group today.


Did You Know?
Flexible Spending Accounts also have relief options that can help participants during the ongoing pandemic. Check out the different options your plan may be eligible to adopt.

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