IRS Issues Guidelines on American Rescue Plan Act COBRA Grant | Small

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On March 11, 2021, President Biden enacted the American Rescue Plan Act (ARPA) which contains a new temporary COBRA grant. The ARPA COBRA grant requires employers to cover 100% of an employee’s cost for maintaining group health coverage under COBRA from April 1, 2021 to September 31, 2021 for those who have lost their health care coverage due to ” reduced hours or involuntary dismissal. On April 7, 2021, the Ministry of Labor published answers to frequently asked questions (FAQs) related to the ARPA COBRA grant and model notices. On May 18, 2021, the U.S. Internal Revenue Service released its own guidance, Notice 2021-31, to employers, plan administrators, and insurers regarding the ARPA COBRA Grant.

Notice 2021-31 (the “Notice”) provides information regarding the calculation of credit to multi-employer plans, employers or insurers, personal eligibility, premium assistance period and other important information. for employers, plan administrators and insurers. The guidance is provided in the form of 86 questions and answers, which generally apply to comparable federal COBRA and state mini-COBRA requirements. Additionally, the notice states that the IRS is considering issuing additional guidance regarding the COBRA grant.

Guidance clarifications

The advisory answers some of the questions left unanswered by the DOL FAQs and provides clarification on other ARPA grant issues.

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One question that was unclear in the wording of the ARPA Act is whether the ARPA grant would cover medical, dental and vision coverage or just medical coverage. The notice specifies that the ARPA grant covers dental and vision coverage as well as medical coverage.

Voluntary layoffs versus involuntary layoffs

The ARPA grant only applies to people who have lost their health coverage due to involuntary dismissal or reduced hours. The Notice provides guidance on when certain terminations of employment should be considered voluntary or involuntary.

The Notice specifies that this decision must be made on a case-by-case basis and depends on the facts and circumstances of a particular termination. The notice provides that if a termination is designated as voluntary or as a resignation, but the facts and circumstances indicate that the employee was willing and able to continue providing services, the termination may be considered involuntary. Factors that would be relevant to this determination include whether the employer would have terminated the employee’s services regardless of the resignation, and whether the employee knew the employee would be terminated.

The notice clarifies that retirement is generally not considered an involuntary termination of employment. However, compulsory retirement can be considered an involuntary termination of employment. Further, if the facts and circumstances indicate that (i) in the absence of retirement, the employer would have terminated the employee’s employment, (ii) the employee was willing and able to continue working , and (iii) the employee knew that the employee would be terminated in the absence of retirement, retirement will be considered an involuntary termination.

The notice further clarifies that an employee’s resignation resulting from a material change in geographic location of employment, or an employee’s participation in certain voluntary window programs, will be considered an involuntary termination.

Additionally, the Opinion provides guidance on whether the layoffs related to COVID-19 issues—for example., safety at work, childcare, reduction of hours, would constitute involuntary dismissals. See Questions and Answers 30-34.

Reduction of hours

The ARPA subsidy also applies to people who have lost their health coverage due to reduced hours. The notice specifies that a person is eligible for the ARPA grant when they experience a reduction in hours following a leave, a lockout, a legal strike, as well as a reduction. voluntary hours or temporary leave, which is defined by IRS as leave where the employer and employee intend to maintain the working relationship. This provision seems incompatible with the exclusion of people from benefiting from the ARPA subsidy who voluntarily terminate their employment, in particular with regard to legal dismissal on strike. The courts may have to decide whether this agency reference complies with the law.

Self-certification / Attestation

The notice says an employer may require individuals to self-certify or prove that they are eligible for COBRA continuation coverage due to reduced hours or involuntary termination. Additionally, an employer may require individuals to self-certify or prove that they are not eligible for group health plan coverage or Medicare, which would disqualify them for the ARPA grant. An employer can rely on these self-certifications / attestations to obtain ARPA credit and must retain any self-certifications / attestations or other documents that they use to substantiate eligibility.

Extension of the period of coverage

It was not clear whether employers should provide the grant to people who were on COBRA or to state continuation coverage during the April to September 2021 grant period due to a continuation period of coverage. exceeding 18 months. The notice clarifies that if a person initially chose COBRA due to an involuntary termination or reduction in hours and remains on continuation coverage for an extended period (that is to say., beyond 18 months) due to a determination of disability, a second qualifying event, or an extension mandated under state law, provided that such additional periods of coverage are between April 1, 2021 and September 30, 2021, they will be eligible for the ARPA grant.

For example, the federal COBRA coverage period for people with disabilities is 29 months, not 18 months. Thus, if an individual elected COBRA as of August 2019, he would be eligible for the ARPA grant even if the COBRA period began more than 18 months before April 2021. In addition, in some states such as New York, the law provides for this. continued coverage under the insured group health plans will be extended for 18 months after the end of the 18-month COBRA federal coverage period, for a total of 36 months. As long as a former employee has elected COBRA and remains on NY Continuous Coverage between April and September 2021, that period of coverage will be eligible for the ARPA grant. The implications for employers regarding this issue are significant, as it could require employers to identify layoffs as far as 36 months for potential notice obligations.

Next steps for employers

Employers are required to provide notices to all persons eligible for the ARPA COBRA grant by May 31, 2021. In many cases, the employer’s COBRA administrator will undertake this task. However, the employer is ultimately responsible for COBRA compliance and must make sure to work with their COBRA administrators to meet this deadline.

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