Employee benefit considerations from ARPA: all things COBRA

The American Rescue Plan Act of 2021 (ARPA) became law in March. The $1.9 trillion stimulus package contains a mix of benefits, tax credits, programs, and subsidies in response to the continuing COVID-19 pandemic. Among the ARPA’s provisions are several related to COBRA. Let’s take a closer look.

How COBRA premium subsidy works

The ARPA’s rules for a 100% COBRA premium subsidy apply to all group health plans subject to the Employee Retirement Income Security Act (ERISA), the Internal Revenue Code, or the Public Health Service Act, whether fully or self-insured. Church plans, although not subject to those laws, may nevertheless have to comply with some of the rules detailed below to the extent they’re subject to state continuation coverage (or “mini-COBRA”) laws.

Most important, the ARPA’s COBRA premium subsidy provisions don’t apply to health care flexible spending accounts (FSAs), qualified small employer health reimbursement arrangements, or “excepted benefits” coverage.

Under the ARPA, employers must subsidize 100% of COBRA (or mini-COBRA) premiums for certain individuals from April 1 through September 30, 2021. Employers will be able to recoup the costs via a tax credit on their quarterly payroll tax returns.

The ARPA generally provides that only “assistance eligible individuals” are entitled to the subsidy. They include any qualified beneficiary (e.g., employee, spouse, child) who: