Employer Information to ARPA’s Affect on COBRA and FFCRA

The American Rescue Plan Act of 2021 (ARPA), which was incorporated into law on March 11, 2021, contains a whole host of requirements and provisions that affect private employers, their employees, and the retirement plans they offer.

Below is an overview of the Consolidated Omnibus Budget Reconciliation Act (COBRA) and the changes related to the First Coronavirus Response Act (FFCRA) for families that affect employers.

COBRA Premium Subsidies:

An important mandate from ARPA that affects employers and their group health plans is the requirement of supply 100% subsidized COBRA Continuing Coverage for Eligible Plan Participants (defined as “Eligible Eligible Persons” or “AEIs”) between April 1, 2021 and September 30, 2021. There are many nuances (and other technical requirements) associated with this mandate that are quick Action requires employers (and their group health plans) to comply. To make matters even more confusing, certain guidelines and regulations from federal agencies such as the U.S. Department of Labor (USDOL) and the Internal Revenue Service (IRS) are required to better understand certain aspects of the COBRA deployment of ARPA only after the guidelines Expected April 1, 2021. However, we recommend preparing now to avoid any likely pitfalls.

Who is an AEI

An AEI is any qualified plan participant who loses or has lost health insurance coverage due to health insurance coverage involuntarily Termination (except for gross misconduct) or reduction in the number of hours worked (note: ARPA does not seem to differentiate between a voluntary or involuntary reduction in working hours), and Who will choose to continue coverage so that it takes effect during the April 1, 2021 and September 30, 2021 timeframes? As with COBRA eligibility in general, an AEI will lose eligibility for COBRA subsidized coverage if it is eligible for another group health plan or Medicare. AEIs must notify the plan if they lose eligibility for COBRA-subsidized coverage.

Who must provide subsidized coverage?

Employer-sponsored health insurance plans subject to federal COBRA requirements or Comparable government continuation programs must offer AEIs fully subsidized continuation coverage between April 1, 2021 and September 30, 2021. Be clearemployers subject to COBRA are required to provide fully subsidized continuing coverage for AEI; as well as small employers who are not subject to COBRA but are subject to a state continuation of the law, such as the North Carolina Health Insurance Act.

What about refund or tax credits?

Employers who meet and provide the subsidized coverage required by ARPA will be reimbursed through tax credits on their quarterly income tax for the cost of subsidized coverage during the six month subsidy period. If the tax credit exceeds the wage tax owed, it will be treated as an overpayment and refunded to the employer. Employers can also request the top-up of the loan (to be treated as a refund), for example if the cost of the subsidized coverage is likely to exceed quarterly income taxes. Further guidance from the IRS detailing how this process will work is expected.

Extension of the electoral term for AEIs

Significantly, ARPA is extending the COBRA term and allowing people whose COBRA term expired before April 1, 2021 to choose subsidized COBRA coverage from April 1, 2021, provided the person otherwise qualifies as an AEI and continues to do so COBRA is eligible for coverage during (part or all of) the six month grant period. This special registration option enables AEIs who have previously rejected COBRA or who have chosen their COBRA cover but then terminated (e.g. due to premium losses) to choose subsidized COBRA cover from April 1, 2021. Although the election period has been extended and ARPA has been expanded to include more individuals who may qualify for subsidized COBRA coverage. The maximum COBRA coverage period (usually 18 months) is not extended by ARPA. This enables AEIs to qualify for subsidized COBRA coverage for part, but not all, of the six-month subsidy period. Employers would be well advised to identify those individuals who fall into this category so that they can notify affected AEIs in a timely manner.

Notice requirements: Plans must provide for three types of communications to AEIs (two of which are one and the same, but the timing and recipients are different).

  1. General Election Notice: Plans must include a general election notice for AEIs that are eligible for subsidized coverage for the first time during the six month eligibility period. This notice must generally inform AEIs of the availability of Premium Aid and other specific details related to the administration of the Subsidized Coverage. Plans can update their existing COBRA election notification or create a new, separate notification to accompany the traditional COBRA election notification. USDOL is expected to issue a sample notice by April 10, 2021 in consultation with the IRS.

  2. Special Election Notice: Similar to the General Election Notice, but this notice must be made available to those AEIs who previously voted but discontinued their COBRA coverage before April 1, 2021, or who previously declined COBRA but are still within their COBRA- Eligibility for cover are period. Such notification must be made within 60 days of April 1, 2021, and AEIs have 60 days after receiving the special election notification to choose subsidized COBRA coverage. USDOL is expected to issue a sample notice with contributions from the IRS by April 10, 2021.

  3. Subsidy Notice Process: The general and special election notices inform the AEIs on the front end of their rights to choose a subsidized COBRA cover, while this Subsidy Notice process informs the AEIs that the subsidized aspect of their COBRA cover is in place in a certain period the date will expire. This notification must be made at least 15 days before the subsidy expires and no earlier than 45 days before the subsidy expires. This notification is not required if an AEI is no longer eligible for COBRA coverage due to group or Medicare coverage. USDOL has the task of issuing a sample notification by April 25, 2021.

Tax credits for providing paid FFCRA sick and family vacations:

ARPA does Not Renewal of the requirement that private employers must grant their employees paid or unpaid leave of absence for reasons related to COVID-19 – as originally prescribed by the FFCRA almost exactly one year ago. ARPA does Extending and expanding the availability of wage tax credits when employers grant voluntary paid vacation in line with FFCRA and now ARPA.

WHO: Tax credits are available to private employers with fewer than 500 employees who voluntarily grant qualified paid leave under the FFCRA. It also appears that local government employers are eligible for Social Security and Medicare tax credits in similar circumstances.

When: Wages that qualify an employer for a tax credit must be paid within a specified period of six (6) months: from April 1, 2021 to September 30, 2021.

What: In short, ARPA extends the qualifying reasons for paid leave (both sick leave and emergency family leave) under the FFCRA. extends the duration of paid leave; and increases the maximum tax credit associated with that paid vacation.

The details:

  • ARPA expands the COVID-19 related sick leave reasons an employee would qualify for paid sick leave (and for which an employer could apply for appropriate income tax credits). The three new qualifying reasons for paid vacation under the FFCRA include: (a) examining or waiting for test results or medical diagnosis for COVID-19 (provided the employee has been exposed to COVID-19 or the test / diagnosis has been requested by the employer ); (b) receiving the vaccine; or (c) recovering from any illness or medical condition associated with receiving the vaccine. To qualify for the tax credit, the employer must grant paid vacation for one of these legitimate reasons.

  • The expanded reasons for sick leave (above) are now included as reasons for qualifying emergency medical leave for paid leave under the FFCRA.

  • ARPA removes the requirement that the first 10 days of emergency medical leave do not have to be paid.

  • A new bank of up to 10 days per employee with qualified paid sick leave will be created, available for tax credits from 2021 April 1, 2021. As a result, the amount of the tax credit per employee has increased from $ 10,000 to $ 12,000.

  • Eventually, ARPA will disqualify employers from receiving a tax credit for violating the FFCRA, such as: B. the anti-retaliation provisions. or Violate the non-discrimination rules by administering the FFCRA’s paid vacation benefits in a discriminatory manner in favor of highly paid employees, full-time employees or employees with seniority.

As you may have heard, ARPA legislation is far-reaching and contains a number of other provisions that affect employers, pension plans and employees. While this article focuses on the subsidized COBRA and FFCRA provisions, there are a number of other provisions relating to defined benefit plans, flexible spending schemes for dependent care, executive compensation, and specific industries. Employers are encouraged to consult their legal counsel to understand the tax credits and other benefits that can result from ARPA, such as: For example, the voluntary provision of paid vacation under the FFCRA and the many new obligations likely to affect management and compliance are a headache if not resolved soon.

© 2020 Ward and Smith, PA. All rights reserved.National Law Review, Volume XI, Number 85

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