ARPA offering 100% COBRA subsidy through September 2021

May 2021 employment law letter

Authors:

Kiran Griffith and Maggie E. Hayes, Perkins Coie LLP

The American Rescue Plan Act of 2021 (ARPA) includes a number of provisions requiring immediate action by employers. One provision in particular offers a 100% federal subsidy for COBRA premiums (including the up-to-2% administrative fees) from April 1 through September 30, 2021. The subsidy applies to group health coverage typically subject to COBRA, except for health flexible spending accounts. The following update summarizes the provisions and flags key implementation considerations to assist employers and plans with planning as we await critical additional guidance from the U.S. Department of Labor (DOL) and the IRS.

Identifying assistance-eligible individuals

The ARPA’s COBRA subsidy is available to “assistance-eligible individuals” (AEIs), generally defined as employees who were involuntarily terminated or experienced a reduction in hours, as well as their covered dependents. We anticipate agency guidance will clarify the scope of the beneficiaries who qualify as AEIs, including the meaning of “involuntary” for terminated workers.

The AEIs may qualify for the six-month subsidy window in two ways:

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