The American Rescue Plan Act of 2021 provides a continuation of healthcare coverage for qualifying individuals by providing a full subsidy for COBRA premiums between April 1 and September 30, 2021. The COBRA premiums are paid by the employer and recouped through the quarterly employment tax filing process via Form 941.

The Department of Labor (DOL) issued model notices and FAQS are the first set of agency guidance regarding implementation of the subsidy. The FAQs clarify the time period of the subsidy, notice requirements, and eligibility and elections.

The COBRA Subsidy Notices

Employers are required to provide various notices under the law, including:

For qualifying events occurring on or after April 1, 2021: Employers are required to give notice to any assistance eligible individual (AEI) if a reduction in hours or involuntary termination of employment occurs between April 1, 2021, and September 30, 2021, that explains their right to the subsidy.

For qualifying events occurring before April 1, 2021: For any qualifying event, such as reduction in hours or involuntary termination of employment, employers must provide a notice to any AEI that thoroughly explains their election rights in regards to the subsidy (after October 1, 2019, but before April 1, 2021). This notice must be provided to the AEI by May 31, 2021, regardless of whether the individual has previously made a COBRA election. Such individuals have up to 60 days (from receipt of the notice) to decide election of the subsidized COBRA coverage.

Before subsidies expire: Employers are required to provide any AEI with a notice of the date on which the subsidy will expire between 15-45 days before the expiration date. If the AEI became covered under another group health plan (or Medicare), employers would not need to provide this notice.

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