Employers were required to submit new COBRA employer paperwork by the end of May, which caused a crush of activity as they rushed to understand the new rules, change policies and re-program computer systems dealing with benefit programs.
The original Consolidated Omnibus Budget Reconciliation Act (COBRA) was enacted in 1985 and, among other things, requires that employers maintain an insurance program which gives some employees the ability to continue health insurance coverage after they leave employment.
The Department of Labor (DOL) had issued a guidance and model notices on an information webpage about how the subsidized COBRA health insurance coverage should be made available under the American Rescue Plan Act of 2021 (ARPA).
Under the new program, employers need to review their records in order to provide required notices and be in compliance with the revisions.
The law provides a six-month COBRA premium subsidy for certain qualified beneficiaries that began on April 1. However, free COBRA coverage does not have to be extended past the end of what would have been the normal expiration date for it (for example, 18 months from the date of a covered employee’s termination of employment or reduction in work hours).
The law requires that individuals receiving free COBRA coverage notify the group health plan of their eligibility for other group health plans or Medicare. Individuals who fail to do so may be subject to a tax penalty. The tax penalty generally is $250, but that can end up being a much higher amount if DOL finds the failure is intentional.
Of course, because it’s coming from Washington, the process must involve a TLA (Three-Letter Acronym). The department has chosen to designate those employees who can receive the benefit as Assistance Eligible Individuals (AEIs). FAQs included on the DOL guidance cover topics concerning eligibility, how to apply for premium assistance, how to change coverage options if permitted by an employer, timelines for enrolling, and how to obtain more information about the COBRA subsidy program.
“The model notices issued by the DOL—which include a model general notice, an extended election period notice, an alternative notice and an expiration of premium assistance notice—will be a helpful resource for employers and plan sponsors in updating their current notices as well as preparing new notification documents,” say attorneys Victoria Zerjav, Rachel Shim and Michael Romeo of the Holland & Knight law firm.
It is not clear whether a mutual termination of employment is considered “voluntary” under the law, they observe. It also is not entirely clear whether a covered employee will be an AEI if the person had a reduction in work hours (such as a furlough or layoff) that subsequently led to termination of employment.
Employers need to review the notices and independently determine whether those employees who are AEIs are entitled to an extended election period notice, they add. Employers also must incorporate the new model general notice into their COBRA documentation protocol for AEIs who experience a reduction in hours of employment or an involuntary termination of employment between April 1 and Sept. 30, 2021.
