HORAN

DOL Issues Guidance on ARPA COBRA Subsidies

Shelly Hodges-Konys — Thu, 08 Apr 2021 07:52:00 GMT

On Wednesday, three entire days before its Saturday deadline, the DOL issued much anticipated FAQs on the COBRA subsidy provided for in the American Rescue Plan Act (“ARPA”). As a reminder, ARPA provides for a 6-month COBRA subsidy for individuals who lost their group health plan coverage due to an involuntary termination or reduction in hours. While the DOL filled in some of the holes for us, there are still some questions that we are left scratching our heads on (such as the mechanics of how employers will receive the credit).

There has been a lot of anticipation on how the prior DOL COVID relief on COBRA timing would interact with the timeframes related to the subsidy. The normal COBRA timing is that individuals have 60 days after the date that they initially receive their COBRA election notice to elect COBRA continuation coverage. Due to the COVID-19 National Emergency, that timeframe was extended until the earlier of (i) one year or (ii) 60 days following the end of the National Emergency. Under ARPA, all Assistance Eligible Individuals have 60 days from receipt of their extended election notice to elect COBRA or claim the subsidy if they are already enrolled in COBRA.

In the FAQs, the DOL stated that that an Assistance Eligible Individual has the choice of electing COBRA continuation coverage beginning April 1, 2021 (or beginning prospectively from the date of a qualifying event if the qualifying event is after April 1, 2021), OR electing COBRA continuation coverage starting from an earlier qualifying event if the individual is eligible to make that election, including under the extended time frames provided under the Joint Notice and EBSA Notice 2021-01. The FAQs further clarified that the subsidy election period does not cut off an individual’s pre-existing right to elect COBRA continuation coverage, including under the extended time frames provided under the Joint Notice and EBSA Notice 2021-01. However, those previous extensions do not apply to the notices or elections related to the subsidy. In other words, the COVID relief does not apply to the second election period and individuals only have 60 days from receipt of their second election notice to elect COBRA prospectively from April 1 on or to claim the COBRA subsidy.

Individuals are not eligible for the subsidy if they are eligible for other group health coverage or Medicare. The FAQs confirmed that other coverage includes eligibility for coverage through a new employer’s plan, a spouse’s plan, or Medicare. Individuals that have coverage through the Marketplace or Medicaid may be eligible for the subsidy. However, if such an individual enrolls in COBRA continuation coverage to obtain the subsidy they will no longer be eligible for a premium tax credit, advance payments of the premium tax credit, or the health insurance tax credit for health coverage during that period that may have been available through the Marketplace or Medicaid.

The subsidy is only for coverage periods from April 1, 2021 through September 30, 2021. The subsidy does not extend the individual’s maximum coverage period. Therefore, if an Assistance Eligible Individual’s COBRA period ends on June 30, 2021, the individual would only be eligible for 3 months of COBRA subsidy. The FAQS confirm that individuals will not receive refunds for any premiums paid for periods prior to April. If an individual has already paid their April premium in full, the employer or plan may either issue a refund or credit to the individual.

In addition to the FAQs, the DOL also issued model notices. These model notices should be used as the starting point to satisfy your new notice requirements under ARPA. There is a new general notice and election form for any qualified beneficiary who loses coverage due to a reduction in hours or involuntary termination of employment with a COBRA period beginning during the period of April 1 – September 30. The DOL issued an alternative notice for plans subject to state continuation coverage.

The DOL also issued a model extended election notice. You can use this notice to inform all individuals who lost coverage due to involuntary termination or reduction in hours and who are still in their 18-month COBRA window in April 2021 of their subsidy rights. Employers must send this notice to Assistance Eligible Individuals before May 31st whether the individual is currently enrolled in COBRA, previously declined COBRA or enrolled and later dropped COBRA. This requirement does not apply to plans that are subject to state continuation requirements as there is no second election period for their participants under ARPA.

The DOL issued a summary of COBRA premium assistance, which is to be enclosed with the other notices to help individuals know whether they are eligible for the subsidy. This summary also includes the form that individuals will complete and return to let you know they qualify as an assistance eligible individual.

ARPA also requires employers and plans to notify Assistance Eligible Individuals 15 – 45 days before their COBRA subsidy will expire. The DOL issued a model notice to be used for this purpose. You do not need to send this notice if the individual is losing the subsidy due to becoming eligible for other group health plan coverage or Medicare.

In the FAQs, the DOL clarified that the COVID relief on timing of providing notices under EBSA Disaster Relief Notice 2021-01 does not apply to the notices related to the COBRA subsidy. A failure to timely send any of the above required notices could result in an excise tax on the employer of up to $100 per qualified beneficiary not to exceed $200 per family, for each day that the notice is late or not provided.

While we may still receive additional guidance on the subsidies, we now have enough information that you should be taking action to comply. Here are some recommended next steps:

Pull together a list of all individuals who lost coverage under your group health plans due to an involuntary termination of employment or reduction in hours on or after October 1, 2019. For plans only subject to state continuation, you will instead pull together a list of those on continuation coverage who lost coverage due to an involuntary termination of employment or reduction in hours and are still in their maximum continuation period.

Check with your COBRA administrator to determine how much they plan to assist you with.
Draft an updated general election notice (or review the one created by your COBRA administrator) for use with individuals who have a COBRA qualifying event on or after April 1.

Draft the new extended election notice (or review the one created by your COBRA administrator) and send to all potential Assistance Eligible Individuals before May 31.

For additional information, please contact your HORAN representative.

The information contained in this document is informational only and is not intended as, nor should it be construed as, legal or accounting advice. Neither HORAN nor its consultants provide legal, tax nor accounting advice of any kind. We make no legal representation, nor do we take legal responsibility of any kind regarding regulatory compliance. Please consult your counsel for a definitive interpretation of current statute and regulation, and their impact on you and your organization.

ARPA Provides COBRA Subsidy at 100%

Rachel Pappenfus — Thu, 11 Mar 2021 19:26:00 GMT

Yesterday, Congress passed the American Rescue Plan Act (ARPA) and the bill is expected to be signed by President Biden in the coming days. The bill provides a 100% COBRA premium subsidy for eligible employees beginning April 1, 2021, and ending on September 30, 2021. The new premium subsidy leaves employers with many questions - not just about the compliance impacts, but the administrative and financial implications of the bill as well.

Let’s start with the subsidy. Employers advance the subsidy to eligible employees and the subsidy is in turn provided to employers through a payroll tax credit. The credit is applied on the employers’ quarterly taxes. If the credit exceeds the payroll taxes due, any additional amounts are refunded to the employer when the Form 941 is submitted.

Next, it’s important to know which employees are eligible to receive a subsidy. Not all individuals that are COBRA eligible will be eligible for subsidy. The bill provides that individuals that experience a COBRA qualifying event due to involuntary termination of employment or reduction in hours are eligible for the subsidy. But, those employees who terminate employment voluntarily are not eligible.

As mentioned above, the subsidy is available for six months at most. It begins on April 1, 2021, and will end the earlier of:

· An individual’s maximum COBRA coverage period; or

· September 1, 2021.

As a reminder, the maximum coverage period for many COBRA qualifying events is 18 months. COBRA subsidies will end early if the individual becomes eligible for other group health plan coverage or Medicare. And, while former employees are generally required to notify their employer if they become eligible for such coverage, the ARPA penalizes individuals $250 for failure to provide notice. If the failure to provide notice is intentional, the penalty is the greater of $250 or 110% of the subsidy amount.

Additionally, employers may allow subsidy eligible participants the ability to choose a different group health plan than the individual’s current plan. However, employers are not required to provide this choice. The premium for the new plan cannot be higher than the premium for the employee’s previous plan, among other restrictions.

The Act also requires notification to individuals that may be eligible for the subsidy. Fear not, the Department of Labor is providing model notices within 30 days from the date of enactment. The notice must include necessary forms for establishing eligibility for assistance, contact information for the plan administrator, a description of the extended election period, and a description of the option to enroll in other coverage (if offered). Such notice must be provided to all individuals who may be eligible for subsidy (those who were involuntarily terminated or lost coverage due to a reduction in hours) including former employees who elected COBRA and discontinued it.

Employers are also required to a send notices to enrolled former employees if their subsidy will expire prior to September 21, 2021. This notice is not required in situations where coverage is ending due to eligibility for other group health plan coverage or Medicare.

One of the big questions still hanging in the air is how these new COBRA requirements are impacted by previously issued Department of Labor extensions of time.

What Employers Should Do Now

Unfortunately, there is not much to do until model notices are issued. Employers can:

· Begin conversations with their COBRA administrators,

· Start compiling a list of potential subsidy eligible individuals for purposes of providing the required notices, and

· Make any necessary budget adjustments to cover additional administrative costs (COBRA administrators are still trying to figure this out, but at a minimum, we expect that there will be postage and mailing charges)

Otherwise, the only thing we can do is take a deep breath, buckle our seatbelts, and settle in for the ride!

Update: Thursday afternoon, March 11, 2021, President Biden signed the American Rescue Plan Act.

Please contact your HORAN representative for additional information.

DOL Extensions of Time Continue?

Shelly Hodges-Konys — Mon, 01 Mar 2021 09:23:00 GMT

You may recall that late last spring, the DOL and IRS issued extensions of time for certain participant and employer deadlines under COBRA, HIPAA, and ERISA. See our original blog post here. The rule provided that the period from March 1, 2020, through 60 days after the announced end of the COVID-19 national emergency, known as the “outbreak period,” must be disregarded for purposes of many plan and participant deadlines. At the time, no one contemplated that the pandemic would last this long and at issue is the fact that the agencies only had the statutory authority to grant extensions for up to one year. This left all of us in the benefits community wondering whether the extensions would all just end on February 28, 2021? The DOL answered the question for us on Friday morning in EBSA Disaster Relief Notice 2021-01.

While this guidance is welcome, it is not without its administrative challenges. The new guidance states that extensions of time will not automatically end on February 28, 2021, for everyone, but that the one-year statutory relief will be applied on a participant by participant basis. And, we all thought the original guidance was confusing! Under the new guidance, a participant’s relief for purposes of actions such as COBRA election or payment for example, will end as of the EARLIER of: (i) one year from the date the individual was first eligible for relief; or (ii) 60 days after the announced end of the National Emergency. The relief end date is applied in the same fashion to a plan sponsor for purposes of providing notices to plan participants. In no event will the relief granted extend beyond 1 year. Fortunately, there are some helpful examples in the guidance:

· If a qualified beneficiary, for example, would have been required to make a COBRA election by March 1, 2020, the Joint Notice delays that requirement until February 28, 2021, which is the earlier of 1 year from March 1, 2020, or the end of the Outbreak Period (which remains ongoing).

· If a qualified beneficiary would have been required to make a COBRA election by March 1, 2021, the Joint Notice delays that election requirement until the earlier of 1 year from that date (i.e., March 1, 2022) or the end of the Outbreak Period.

· If a plan would have been required to furnish a notice or disclosure by March 1, 2020, the relief under the Notices would end with respect to that notice or disclosure on February 28, 2021. The responsible plan fiduciary would be required to ensure that the notice or disclosure was furnished on or before March 1, 2021.

In the guidance, the DOL recognizes that employers and participants may continue to face any number of challenges due to the ongoing nature of the pandemic and reminds that, “The guiding principle for administering employee benefit plans is to act reasonably, prudently, and in the interest of the workers and their families who rely on their health, retirement, and other employee benefit plans for their physical and economic well-being. This means that plan fiduciaries should make reasonable accommodations to prevent the loss of or undue delay in payment of benefits in such cases and should take steps to minimize the possibility of individuals losing benefits because of a failure to comply with pre-established time frames.”

The DOL also suggests providing notification to plan participants in the following circumstances:

· Sending notice to individuals regarding the end of the relief period if the plan administrator should reasonably know that the end of the relief period for an individual action is exposing a participant or beneficiary to a risk of losing protections, benefits, or rights under the plan

· Providing reissued or amended notices if original disclosures failed to provide accurate information regarding the time in which participants and beneficiaries were required to take action

· Notifying participants and beneficiaries who are losing coverage under their group health plans that other coverage options may be available to them, including the opportunity to obtain coverage through the Health Insurance Marketplace

Conclusion

As with the previous guidance, this new guidance will take some time to understand. In addition to providing additional notices, employers, third party administrators, and COBRA administrators may need to adjust their administrative practices. We will continue to communicate the impacts of this guidance as we learn more.

Please contact your HORAN representatives for additional information.

IRS Releases Guidance for FSA Relief Under the Consolidated Appropriations Act

Rachel Pappenfus — Wed, 24 Feb 2021 04:07:00 GMT

The wait is over! The IRS has finally issued clarifying guidance related to flexible spending account (FSA) relief provided under the Consolidated Appropriations Act, 2021 (CAA) signed back in December. Our earlier post is available, here. While the relief under the CAA was good news for employers and employees, it also raised a lot of questions. In particular, employers wanted to know more about the option to extend reimbursement from health FSAs through the end of the plan year when a participant ceases participation. Last week, the highly anticipated guidance was released in Notice 2021-15.

This new guidance provides not only much needed clarification but gives great discretion to employers in the kind of relief they can choose to offer employees. The guidance allows employers the opportunity to balance the needs of its workforce with what makes sense from a practical administrative and operational perspective. As stated in our previous blog post, employers may provide some of the relief, all of the relief, or none of the relief and there are a few surprises in the guidance.

Below is a breakdown of the FSA relief provided under the CAA and an overview of the guidance clarifying each component of that relief:

Carryover of unspent account balances from 2020 into the 2021 plan year (and/or from 2021 into 2022)