DOL Releases COBRA Subsidy Model Notices and Forms

Background

The American Rescue Plan (ARP) Act of 2021 includes a temporary six-month COBRA subsidy when group health plan coverage is lost due to reduction in hours or an involuntary termination. The subsidy first became available on April 1, 2021.

The subsidy will generally end on September 30, 2021. However, it will end earlier for individuals who become eligible for other group coverage or Medicare, or whose maximum period of COBRA coverage ends before September 30. We summarized the ARP Act’s COBRA subsidy in our March 11, 2021 insight.

Model notices, forms and FAQs

The newly released documents include:

• Model ARP General Notice and COBRA Continuation Coverage Election Notice incorporating information about the new COBRA subsidy — This notice is for people who are newly eligible for COBRA between April 1, 2021 and September 30, 2021 because of a reduction in hours or an involuntary termination of employment. This notice may be provided separately or with the COBRA election notice following a COBRA qualifying event.
• Model COBRA Continuation Coverage Notice in Connection with Extended Election Periods — This notice is for people who are currently enrolled in COBRA continuation coverage due to a reduction in hours or involuntary termination, as well as individuals who would be eligible for the subsidy if they had elected and/or maintained COBRA coverage.
• Summary of COBRA Premium Assistance Provisions under the American Rescue Plan Act of 2021 that must accompany either notice described above — The summary includes two forms. Eligible individuals use one form to apply for the subsidy (“Request for Treatment as an Assistance Eligible Individual”). A person receiving the subsidy must use the other form to report eligibility for other group coverage or Medicare (“Participant Notification”).
• Model Notice of Expiration of Period of Premium Assistance — This notice must be sent to individuals 15-45 days before their COBRA subsidy will expire.

All of these documents are available on the DOL’s website.

The DOL website also includes FAQs that COBRA-qualified beneficiaries, including assistance eligible individuals, may ask.

Notice deadlines and election deadlines

For people eligible for the extended election opportunity, the plan administrator needs to provide the notice no later than May 31, 2021. In general, people who would have been eligible for COBRA starting in November 2019 will be entitled to an extended election opportunity if their qualifying event was reduction in hours or involuntary termination of employment. This is the case because their 18^th month of COBRA is April 2021.

For people who are newly eligible to elect COBRA, plan administrators should follow the plan’s regular COBRA rules relating to distribution of the election notice.

Anyone applying for the subsidy is required to request the subsidy (and elect COBRA, if applicable) within 60 days of receipt of the either of the above notices. This 60-day deadline applies to all subsidy applications even if the individual would have additional time to elect COBRA under special rules in place during the COVID-19 national emergency.

Implications for plan sponsors and administrations

While use of these model notices is not required, the DOL considers their use to be good-faith compliance with the content requirements, and encourages their use.

Plan administrators should carefully read the model notices. Two issues in particular may need special attention:

• Plans that will not permit assistance eligible individuals to enroll in a different (not more expensive) plan option than that which they were in at the time of the qualifying event should delete that language in the notices.
• Public sector plans that are not extending COBRA deadlines (as is required of ERISA-governed plans) should delete references to extended deadlines under EBSA Disaster Relief Notice 2021-01. We discussed that guidance in our March 2, 2021 insight.

Additional guidance on the COBRA subsidy should be forthcoming from the Treasury Department and the IRS. It will address other issues concerning eligibility and how plans will receive the tax credit subsidy.