Employers, Read Up on Updated COBRA GuidanceJune 11, 2021
Attention employers…are you up to speed on how Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) guidance has changed? We have the details here.
Employers, you’ll want to read up on new guidance from the IRS on tax breaks under the American Rescue Plan that impact health coverage under COBRA.
What is COBRA?
The Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) gives employees (and their families) who lose their health benefits the option to continue group health benefits through their employer for a limited period of time.
Employers with 20 or more employees on more than 50% of their typical business days in the previous calendar year (and have a group health plan) are required to offer COBRA benefits. Some examples include medical, dental, vision and prescription plans, flexible spending accounts (FSAs), health reimbursement arrangements (HRAs) and employee assistance plans (EAPs).
What did the American Rescue Plan change?
Under the ARPA, individuals who elect COBRA health coverage following a reduction in hours or involuntary employment termination are eligible for a temporary, 100% reduction in the premium.
Entities, including employers, multi-employer plans and insurers, that maintain group health plans are eligible for a corresponding tax credit under the new law as well.
Who is eligible?
Individuals who meet the criteria below are eligible:
- Those who lost healthcare coverage due to reduced hours or involuntary employment termination
- Those who, as of April 1, 2021, were still within their COBRA coverage period
- Those who have not become eligible to be covered under another group plan (such as a spouse’s plan) or Medicare.
When is the subsidy effective?
The subsidy is effective April 1, 2021 until September 30, 2021.
Questions? Contact us.