On March 12th, The American Rescue Plan Act (ARP) was signed into law by President Biden. The $1.9 trillion stimulus will subsidize the full cost of premiums for COBRA for individuals that are offered COBRA due to a decrease in hours or layoff due to COVID-19. The subsidy will begin on April 1, 2021 and extend through September 30, 2021. This subsidy will not count towards an individual’s gross income and will be treated as an advance refundable payroll tax credit for the employer.
There will also be an extended period to elect and a look back period to offer the COBRA subsidy. Those who have not yet enrolled in COBRA continuation coverage or who previously enrolled but discontinued that coverage can opt to enroll effective April 1, 2021. However, their enrollment period may not exceed the time period they would have been eligible to participate in COBRA had they elected when initially offered. The subsidy is not available to those who are eligible to enroll in another group health plan (e.g., a spouse’s plan or Medicare).
Finally, employers and group health plans will be required to provide several new notices to those who become eligible for COBRA continuation coverage. Notices will address the availability of the new subsidies, the option to enroll in available different coverages, the extended period to enroll in COBRA continuation coverage, and the expiration of the premium assistance. The model notices for these purposes will be available within forty-five (45) days.