Labor Department Issues New Notice for Expiring COBRA Premium Assistance

The Department of Labor (DOL) has issued a new notice to address upcoming expiring COBRA premium assistance for covered employees. Markedly, the Notice of Expiration of Period of Premium Assistance satisfies specific requirements under the American Rescue Plan Act (ARP). Previously, the Internal Revenue Service (IRS) issued updated COBRA coverage guidance relating to tax breaks. Accordingly, the ARP also provides tax credits involving COBRA continuation health coverage.

Background of COBRA Premium Assistance

In March 2021, President Joseph R. Biden signed the ARP into law. As a result, free COBRA assistance was made available to covered employees. Specifically, the ARP contained a 100% premium subsidy allowing assistance eligible individuals (AEIs) health insurance for up to six months. Chiefly, the assistance period began on April 1st, 2021, and ends on September 30th, 2021 (the Free COBRA Period).

Premium Assistance Eligibility

Basically, AEIs could receive free COBRA premiums if any of the following applied:

• employment was involuntarily terminated (other than for gross misconduct);
• there was a reduction in hours; and
• they were eligible for COBRA during the Free COBRA Period.

Additionally, AEIs include those who didn’t elect COBRA coverage or discontinued COBRA coverage before April 1st, 2021. The individuals, however, must still be within their maximum 18-month COBRA period.

Overview of Expiring COBRA Premium Assistance

In summary, the ARP states the expiration date for the free COBRA coverage ends on the earliest of the following:

• September 30th, 2021;
• expiration of the individual’s maximum COBRA period; or
• the date the individual becomes eligible for coverage under another group health plan or Medicare.

Also, in the ARP, plan administrators are required to give notice to AEIs regarding their expiring COBRA premium assistance.

Required Notice of Expiring Assistance

It’s important to realize that employers must provide the required notice during a specific window of time. Accordingly, employers must send the expiration notice to AEIs not earlier than 45 days before the expiration date. Likewise, AEIs cannot receive the notice any later than 15 days before the end of the subsidy period. Given these points and that the subsidy will end on September 30, employers should deliver notices by September 15. Presently, employers have two options in creating their expiring COBRA premium assistance notice. Firstly, employers and plan administrators may use the new Notice of Expiration of Period of Premium Assistance. Before utilizing the model, however, the administrator must add the appropriate missing information. Secondly, employers and plan administrators may create a notice to distribute to AEIs. Creators must include the following information in a self-made notice:

• the ARP COBRA subsidy will expire soon and include the date of expiration; and
• individuals may be eligible for coverage without any subsidy through COBRA continuation coverage or coverage under a group health plan.