IRS Issues Guidance On Cobra Premium Subsidy

On May 18, 2021, the Internal Revenue Service (IRS) issued guidance on the COBRA premium subsidy provided by the American Rescue Plan Act of 2021 (ARPA). The ARPA was passed in March and provides a variety of funding and relief to individuals and businesses due to the COVID-19 pandemic.

The ARPA provides a temporary 100 percent premium subsidy for individuals whose reduction in hours or involuntary termination of employment makes them eligible for COBRA continuation coverage from April 1, 2021 through September 30, 2021 by requiring health insurance issuers and group health plans to treat those who select COBRA coverage as having paid the full amount of their COBRA premium. The person to whom premiums for COBRA continuation coverage are payable (the employer, insurer, or multiemployer plan, as applicable) is entitled to a refundable tax credit against its share of Medicare taxes. The ARPA also requires group health plans to provide notices to individuals losing health coverage to inform them about premium assistance that may be available to them.

The IRS’s guidance, Notice 2021-31, explains the COBRA premium subsidy in detail and then provides questions and answers on many of the issues that have arisen under the ARPA.

If you have questions about the COBRA premium subsidy, you may find this guidance, as well as earlier guidance by the Department of Labor, to be helpful. Additionally, KZA attorneys are always available to assist you with these matters. 

KZA Employer Report articles are for general information only; they are not intended and should not be construed to be legal advice. Reading or replying to such articles does not establish an attorney-client relationship. In addition, because the subject matters and applicable laws discussed in Employer Report articles are often in a state of change and not always applicable to every type of business entity or organization, readers should consult with counsel before making decisions based on the same.