FAQ: How do the ARPA COBRA subsidies interact with the extension of certain timeframes relief?
While both types of relief could apply to an employee who has experienced a reduction in hours or involuntary termination, the application of the provisions differ.
The COBRA subsidies provided through the American Rescue Plan Act of 2021 (ARPA) allow certain individuals to elect COBRA coverage and have that COBRA coverage 100% subsidized by the federal government from April 1, 2021, to September 30, 2021. (We first discussed this provision in the March 16, 2021, edition of Compliance Corner.) The extension of certain timeframes for employee benefit plans, participants and beneficiaries required plans to disregard the period from March 1, 2020, until 60 days after the end of the National Emergency (known as the “Outbreak Period”) for certain deadlines, including the deadlines applicable to COBRA notices and payment. (We first discussed this provision in the May 12, 2020, edition of Compliance Corner.)
Employees who were due an offer of COBRA under the extensions of certain timeframes continue to have the opportunity to elect COBRA based on the date of their termination or reduction in hours. Specifically, the most recent guidance on this subject (which was discussed in the March 2, 2021, edition of Compliance Corner) indicated that the relief under these extensions will continue until the earlier of a) one year from the date an individual or plan is first eligible for relief or b) 60 days after the announced end of the national emergency (the end of the outbreak period). Since the national emergency has yet to end, some individuals will be entitled to this relief at the same time that they are entitled to elect COBRA under the ARPA.
There are a few distinctions to be made, though. First, the extensions of certain timeframes applies to all COBRA-qualified beneficiaries, while the ARPA COBRA subsidies only apply to those who were involuntarily terminated or experienced a reduction in hours. So while individuals whose COBRA was triggered by divorce, death or aging off of the plan continue to have an extended time period by which they can elect COBRA, they are not eligible for the COBRA election and subsidies provided by the ARPA.
Second, the election of COBRA under the two provisions takes effect differently. Under the ARPA, individuals who were involuntarily terminated or had their hours reduced going back as far as October 2019 may now elect COBRA (even if they waived it, or elected and dropped it before). As long as they are not eligible for Medicare or other group health plan coverage, the relief provided through ARPA will allow for them to elect that COBRA prospectively, and receive a subsidy from April 1, 2021, through September 30, 2021, as long as there are still months left in their 18-month COBRA maximum duration period.
On the other hand, individuals who are eligible for relief under the extension of certain timeframes could potentially elect COBRA, but would need to elect and pay for the coverage retroactively back to the date of their COBRA-triggering event. In other words, the relief provided under that guidance allows employers to require that the coverage be instated retroactively. Individuals who are eligible for this relief also can likely elect COBRA through the end of the outbreak period even if they are eligible for Medicare or other group health coverage.
Third, the DOL’s most recent guidance on the ARPA COBRA subsidies makes it clear that the extensions of timeframes guidance does not affect the COBRA notice requirements under the ARPA. As discussed in an article in this edition of Compliance Corner, employers only have until May 31, 2021, to notify assistance-eligible individuals (AEIs) of their right to elect COBRA and receive subsidies under the ARPA. That time is not extended by the extensions of timeframes. Likewise, AEIs only have 60 days to elect COBRA under the ARPA; if they do not do so, they waive their opportunity to elect COBRA and receive subsidies.
So while it is possible for both pieces of guidance to apply to certain individuals, their effect and application will be different. Consider the following example of an employee who was terminated in December 2020:
Amy was involuntarily terminated in December 2020 and would have the right to elect COBRA, effective beginning January 2021. She does not elect COBRA.
Under the extension of certain timeframes, Amy would have until the earlier of the end of the outbreak period or one year from the date she was first granted relief (January 2022) to elect COBRA. If she chose to do so, she would have to pay for COBRA going back to January 2021.
Under the ARPA, Amy should receive a notice from her previous employer by May 31, 2021, notifying her of the right to elect COBRA and receive a subsidy from April 1, 2021, through September 30, 2021. As long as Amy is not eligible for Medicare or other group health plan coverage, she could elect COBRA prospectively and receive 100% subsidized COBRA for the entirety of the subsidy period (since her COBRA maximum duration period would not be over until June 30, 2022).