• The ARPA COBRA Subsidy FAQ: 15 Key Takeaways

    The IRS recently issued Notice 2021-31, which provides much-anticipated guidance for employers on the ARPA COBRA subsidy. The document is 40+ pages long, and the nature of much of the guidance is very detailed, very nuanced, and very narrow. It presents a plethora of situations, many of which most employers will not need to deal with directly or which only serve to clarify otherwise intuitive lines of thought. Add its sheer length, and you have a document that cannot be easily condensed or summarized into a short, meaningful article.

    That said, following are 15 key takeaways that are relevant for employers. They are presented in a short format for easy consumption, with references to the specific FAQ document those that want to dive deeper. The summary is presented in the order of the FAQ document. However, we have also highlighted five items as “Critical Issue.” These reflect guidance which is either critical or surprising in nature.

    Background on ARPA Subsidies

    As a recap, ARPA provides a 100% COBRA premium subsidy for individuals who lost coverage due to a reduction in hours or due to an involuntary termination of employment (Assistance Eligible Individuals or AEIs). The premium subsidy is available for medical, dental, vision, HRA, and EAP coverages for up to six months, from April 1, 2021, through September 30, 2021. ARPA provides that COBRA premiums are “presumed paid” by AEIs and the employer (or insurer) to whom the premiums were to be paid is entitled to a tax credit against its share of Medicare taxes.

    Key Takeaway #1: Self-Certification or Attestation   (CRITICAL ISSUE) 

    Employers may require individuals to self-certify or attest to being eligible for the subsidy and not being eligible for another group health plan or Medicare. Employers may rely on this attestation for the purposes of claiming the tax credit. In an odd twist of wording, the IRS indicates that employers are not required to secure an attestation from AEIs, however, they ARE required to maintain documented proof and substantiation in order to claim the tax credit. COBRA reporting of AEIs that have provided attestation will suffice for this documentation. (Q-4, Q-5, Q6)

    Key Takeaway #2: Waiting Period for New Coverage

    If an AEI is “eligible for” other group health plan coverage but that plan has a waiting period, the subsidy can continue during the waiting period. (Q-9)

    Key Takeaway #3: Exchange Coverage

    If a Qualified Beneficiary is currently covered under an individual policy through a Health Insurance Exchange, they are eligible to drop the Exchange coverage, re-elect COBRA coverage, and receive the subsidy. (Q-13)

    Key Takeaway #4: Retiree Coverage

    If an individual would otherwise be an AEI but has access to retiree coverage, eligibility for the retiree coverage is not a disqualifying event so long as the retiree coverage is offered under the same group health plan as is provided for active employees. The premium credit would be limited to the premium for active employees. (Q-18, Q-36)

    Key Takeaway #5: Only Spouse and Children (Not DPs )  (CRITICAL ISSUE) 

    Only a spouse or children who were covered on the day before the Qualifying Event (or a child born to or adopted by the covered employee during the COBRA period) are eligible for the subsidy. Other dependents, even though they may be eligible for coverage are not eligible for the subsidy. Of note here is coverage for Domestic Partners who may be covered under COBRA coverage, but who are not considered Qualified Beneficiaries under the COBRA law. This means they are not eligible for the subsidy. (Q-19)

    Key Takeaway #6: What Constitutes an Involuntary Termination

    There are 11 questions which outline various permutations of what constitutes an involuntary termination. Generally, these fall in line with a colloquial understanding of an involuntary termination. However, if unique circumstances arise, employers should review these questions for confirmation. (Q-24-Q-34)

    Key Takeaway #7: No Partial Subsidy for Richer Plan Coverage  (CRITICAL ISSUE) 

    If an employer allows a special enrollment and an employee elects a richer plan, the subsidy is not available for the equivalent cost of coverage under the base plan (with the employee paying the buy-up cost). To be clear, while not intuitive, no subsidy would be available if the employee elected a richer plan. There is an exception to this rule if the base plan is no longer available. In that case, the individual must be offered coverage under the “most similar” plan. (Q-41, Q-42)

    Key Takeaway #8: Employer No Longer Subject to Federal COBRA

    Employers that are no longer subject to federal COBRA (due to a reduction in the number of employees as of Jan 1, 2021) are still required to provide an extended enrollment period and ARPA subsidies to individuals who would otherwise be AEIs if their Qualifying Event occurred when they were subject to federal COBRA. Whether a QB is eligible to elect federal COBRA (and receive the ARPA subsidy) is determined by the employer’s status at the time of the Qualifying Event (not at the time ARPA would be administered). (Q-45)

    Key Takeaway #9: Extended Election Only Applies to Federal COBRA

    The extended election period (where QBs can jump back onto COBRA) only applies to federal COBRA, not to state COBRA-lookalike laws, unless the state law specifically provides for such a provision.

    Key Takeaway #10: Extended Deadlines Don’t Apply

    The election period for the ARPA extended election period is 60 days from receiving formal notification in order to receive the subsidy. The Emergency Relief Notice provisions which allow for extensions of timeframes for COBRA elections, extended payment deadlines, and non-contiguous retroactive coverage for COBRA elections do not apply. (Q56-Q59)

    Key Takeaway #11: Subsidized Amount Is 102%

    The subsidized amount is the full premium (or premium equivalent) plus the statutory 2% COBRA administration fee. (Q-63)

    Key Takeaway #12: Employer Subsidies Don’t Qualify for ARPA Subsidy  (CRITICAL ISSUE) 

    Employers who have provided any direct, pre-existing COBRA subsidy are NOT entitled to recoup any portion of their direct subsidy via the ARPA subsidy program. If an employer subsidy expires during the ARPA subsidy period, the employee would then be eligible for the ARPA subsidy. If an employer subsidized a portion of the COBRA premium, the AEI is eligible for an ARPA subsidy for the premium amount that was required to be paid by the Qualified Beneficiary. (Q-64)

    Key Takeaway #13: Subsidy Calculations for Non-AEIs  (CRITICAL ISSUE) 

    If an AEI also covers a non-AEI (for example, a DP or spouse who was added after the Qualifying Event), the amount of the subsidy calculation is based on the premium differential for those who are AEIs and those who are not. Here, an example is instructive. Assume the employee, DP, and 2 children are covered. The EE+Sp/DP+Child(ren) premium is $1,800, and the EE+ Child(ren) premium is $1,300. The amount of the ARPA subsidy would be $1,300 and the $500 cost attributable to the DP would not be subsidized. Alternatively, assume a 3-tier EE+2+ premium of $1,800, the subsidy for EE+Child(ren) coverage would be $1,800, and the DP would be covered at no additional cost. (Q-68)

    Key Takeaway #14: Timing and Method of Tax Credit

    Employers become entitled to the tax credit at the point when an election is made (for retroactive months) and on the first of each month thereafter for prospective months. The tax credit is taken against the employer portion of Medicare taxes on Form 941, Employer Quarterly Federal Tax Return. Employers may reduce their federal tax deposits up to the amount of the credit and/or request an advance (on Form 7200) of the amount if the credit exceeds the federal tax deposits. Note that tax credits taken are includible in gross income for employers. (Q-74, Q-75, Q-79)

    Key Takeaway #15: No Tax Credit Refunds Required

    If an AEI fails to provide notice that they are no longer eligible for the subsidy in a timely manner, the employer is still entitled to a previously taken tax credit (unless the employer knew of the individual’s eligibility for other coverage). (Q-78)

  • 2020 San Francisco HCSO Reporting Requirement Waived

    Earlier this month, the City of San Francisco waived the 2020 reporting requirement for the Health Care Security and Fair Chance Ordinances. This marks the second year in a row that the reporting requirement has been waived due to the Public Health Emergency. This is welcome relief for employers who employ workers in the City and County of San Francisco.

    As a reminder, this reporting reprieve does not waive the requirement to comply with all other aspects of the ordinances. If you have questions about your need to comply, please reach out to your Vita Account Manager.

  • Navigating Workplace Vaccine Mandates, Vaccine Hesitancy, and Employer Responsibilities [Video]

    As employees begin returning to the workplace, how can employers keep their employees safe, accommodate their concerns, and minimize liability? What are the challenges and risks of instituting a vaccine mandate? Join Jeanine DeBacker, employment law attorney at McPharlin Sprinkles & Thomas LLP, and Brie Linkenhoker, PhD and Founder of Worldview Studio, as they provide guidance and clarity on these questions and others. We address several topics, including:

    • Vaccine mandates
    • Privacy issues
    • Accommodation requests
    • Masking protocols
    • Employee education resources

    Note: The content of this presentation is not to be considered legal advice. We recommend Clients speak with legal counsel specializing in labor and employment law to ensure your organization meets requirements.

    Additional Resources

    Employer Action Plans

    COVID-19 Vaccine Education

    Model Mandatory/Voluntary Vaccine Policy Memo to Employees

    Mandatory Vaccination Option

    Subject: Mandatory Vaccination Policy

    [Company name] has implemented a mandatory vaccination policy effective [date] requiring [disease name(s)] vaccination(s) for all employees. In accordance with [Company name]'s duty to provide and maintain a workplace that is free of known hazards, we are adopting this policy to safeguard the health of our employees and their families, our customers and visitors, and the community at large from infectious diseases that may be reduced by vaccinations. In making this decision, the executive leadership team reviewed recommendations from [insert department names or other organizations consulted such as the Centers for Disease Control and Prevention, the Advisory Committee on Immunization Practices and local health officials].

    All employees must receive the vaccination no later than [date]. Individuals seeking an exemption from this requirement for medical or religious reasons should complete a request for accommodation form and submit the form to the human resources department.

    Vaccinations will be administered by [insert details regarding who will provide the vaccine and where employees must go to receive the vaccine].

    [Company Name] will pay for all vaccinations and the time spent receiving the vaccinations.

    Should you have any questions regarding this new policy, please contact [name and contact information].

    Voluntary Vaccination Option

    Subject: Voluntary Vaccination Policy

    [Company name] is implementing a voluntary vaccination policy effective [date] regarding [disease name(s)] vaccination(s) for employees. In accordance with [Company name]'s duty to provide and maintain a workplace that is free of known hazards, we strongly encourage employees to receive this vaccination to minimize the risk of infectious disease in our workplace. In making this decision, the executive leadership team reviewed recommendations from [insert department names or other organizations consulted such as the Centers for Disease Control and Prevention, the Advisory Committee on Immunization Practices and local health officials].

    Employees may obtain the vaccination wherever they choose; however, [Company name] is facilitating vaccinations through [insert details regarding who will provide the vaccine and where employees can go to receive the vaccine]. [Company Name] will pay for all vaccinations and the time spent receiving the vaccinations.

    Should you have any questions regarding this new policy, please contact [name and contact information].

  • Washington State New Long-Term Care Trust Tax

    Starting January 1, 2022, employees who work in the state of Washington will pay a mandatory 0.58% payroll tax on all W-2 income with no cap. This tax will fund a state-run long-term care insurance program which can provide up to a maximum of $36,500 of long-term care benefits for care provided in the state. This equates to a daily benefit of $100 per day for one year. There is a provision to increase the benefit. However, benefit increases will track with the Washington CPI. The tax will increase as income increases since there is no cap to the tax.

    Eligibility Details

    To be eligible for benefits, employees must have paid into the system for three years within the past six years or for a total of 10 years with at least five of those years paid without interruption. Benefits can only be received if you reside in Washington state.

    Opt Out Option

    Employees can opt out of this tax permanently if a) they own their own long-term care insurance policy, and b) if they can attest that the plan provides benefits equal to or better than the state program. The long-term care insurance must be in place by November 1, 2021. This attestation must be submitted to the state’s Employment Security Department between October 1, 2021 and December 31, 2022.

    Who Should Consider a Private LTC Policy?

    Arguably, there are three groups of employees who may benefit from considering a private long-term care insurance policy:

    1. Employees who earn $300,000 or more in annual compensation. Most employees in this income bracket can find a policy that is more cost effective than the payroll tax.
    2. Employees who plan to move out of the state of Washington when they retire because they will forfeit the benefit.
    3. Employees who plan to retire in the next few years since they will not have vested benefits through the state.

    Employer Action

    If you have employees in Washington and would like to consider a long-term care benefit, provide a resource for employees, or explore an executive carve-out, please reach out to your Vita Account Manager. We will do an assessment to confirm the best options and course of action.

  • 2022 Health Savings Account (HSA) Limits Announced

    The Internal Revenue Service has announced the 2022 dollar limitations for Health Savings Accounts as well as underlying qualifying High Deductible Health Plans. The maximum HSA contribution and out of pocket maximum limits saw increases at both the family and individual levels.

    High Deductible Health Plan Policy Limits

      2021 2022
    Minimum Deductible Individual   $1,400 $1,400
      Family $2,800 $2,800
    Maximum Out of Pocket Limit Individual  $7,000 $7,050
      Family $14,000 $14,100


    Health Savings Account Limits

        2021 2022
    Maximum HSA Contribution Individual   $3,600   $3,650
      Family $7,200 $7,300
    Over Age 55 Catch-Up Contribution   $1,000  $1,000


    High Deductible Health Plan Policy Limits

    Any amount can be contributed to an HSA up to the maximum annual contribution, regardless of the actual deductible of the underlying HDHP plan. The HSA contribution rules assume that you will be enrolled on a high deductible health plan for 12 consecutive months.

    Embedded Deductibles on an HSA-Qualified HDHP

    Many qualified high deductible health plans have an aggregate family deductible, so that if an employee covers any dependents on the plan, the family deductible applies and the individual deductible is not taken into consideration. However, there are some plans that have an embedded individual deductible such that if one member of the family meets the embedded individual deductible, then the plan coinsurance would start to pay once that individual deductible is met. In order for such a plan to be a qualified HDHP, the embedded individual deductible must be at least the minimum family deductible outlined above. As an example, these types of plans would need to have an embedded individual deductible of $2,800 to remain HSA qualified in 2022.

  • Blue Cross Blue Shield Class Action Lawsuit

    Blue Cross and Blue Shield companies reached an agreement on October 30, 2020 to settle a legal dispute challenging elements of Blue Cross Blue Shield Association licensing agreements. After eight years of litigation, the Blue Cross Blue Shield Association did not admit fault, but they did agree to a settlement to end litigation. In the settlement, BCBS agreed to make operational changes as well as to provide payment to members of the class involved in the case. The settlement agreement amount is $2.67 billion. This is a very significant settlement amount and has garnered the attention of many employers, individuals, and attorneys.

    Who are potential class members?

    Potential members of the class include the following groups to the extent they were covered by a BCBS health policy during the covered period:

    • Individuals and insured group health plans between February 8, 2008 and October 16, 2020.
    • Self-funded plans between September 1, 2015 and October 16, 2020.

    What do Employers Need to Do? 

    Potential Class Members will receive a formal notification via mail or email. In addition to your notification as an employer, many of your employees will also receive notification directly. Although you are not obligated to notify employees of the settlement, we understand the direct communication from the Claim Administrator to employees is likely to spark many questions back to HR. 

    Vita drafted sample communication you may choose to send to your employees about the settlement; please reach out to your Vita account manager or click “Contact Us” on our website if you have any questions or if you did not receive a copy of the sample employee-facing communication.  

    It is also possible to opt into the lawsuit as a member via the link on the settlement website (www.BCBSsettlement.com). (Link) www.BCBSsettlement.com 

    What do Employees need to do?

    Employees who were covered under your health plan will be receiving notification of the settlement and of their option to file a claim directly.  If employees wish to file a claim, they can do so on the official settlement website or via mail. Although the online claim form has many optional fields, the following are the only required fields:  

    • Personal identifying information (name and contact details) 
    • Health plan name selected from a dropdown menu 
    • Employer name for the group policy 
    • Payment elections and review/signature 

    Importantly, the detailed policy information, coverage date information, and premium allocation does not need to be completed.   

    Sharing the Settlement with Employees

    If an employer group health plan receives a settlement amount, will it be necessary to share the proceeds of the settlement with employees? According to the settlement site’s FAQ (#35), no. Since employees are eligible to participate in the settlement directly and receive a payment for their estimated portion of premiums, employers can retain any settlement they receive if they choose to file a claim. 

    Realistically, how much might we get?

    This is the key question that everyone is asking. And the answer is that it is VERY difficult to tell because it is based on the number of respondents that join the lawsuit as class members. But, in the interest of trying to apply some measure of thought to the otherwise completely unknown equation, we share some “back of the napkin” thoughts . . . with the understanding that no one has ANY real idea and that these numbers may be completely off base.

    General Calculations

    • 158,000,000: People covered by Employer sponsored plans. This rough analysis does not include individual plans or ASO plans. (Source: Kaiser Family Foundation)
    • 52,666,667: People covered by a BCBS plan (1 in 3)
    • $2,677,000,000: Total settlement amount
    • $1,900,000,000: Expected approximate distributable settlement (those who submit a valid, timely claim)
    • $146,154,000: Approximate award per year of coverage (13 years)
    • $2.78: Total award per year / Total people covered per year*

    *Assuming all group health plan claimants file, but not considering individual plans or ASO contracts. Adding these elements would further reduce the total award per year per person covered.

    Example Application to Employer Plan

    • 100: Employees
    • $278: For employer per year
    • 5: Years of coverage
    • $1,387: Potential total award

    Dilute for Employee Contributions

    • If employees contributed to health plan via contributions, settlement proceeds would need to be passed through to plan participants.

    Enhance If Less Than 100% of Claimants Join Lawsuit

    • Unweighted average claimants per class action suit = 21%
    • Unweighted medium claimants per class action suit = 8%
    • However, most potential class members in class action lawsuits are simply just letter or postcard. This suit is a very high profile one with lots of media coverage. Also, the bulk is employer based, so single employers will be collecting for groups of employees. Add to that the reality that essentially all large plans with significant potential settlements will certainly file, thus bringing up the both the average and the medium numbers. Thus, it is expected that a significantly higher than average number of claimants will file. This means that the potential award per employee per year will likely remain low (because we can assume that essentially all large stakeholders will join).
    Once again, these are very rough numbers . . . the roughest possible. It is also important to realize that the actual final settlements will most certainly be calculated based on actual premium volume, not on number of covered lives, so that adds an additional measure of variability to this rough analysis. That said, we wanted to put out at least some measure of number-thought to provide context on the $2.67 billion total settlement number.


    Do I need an Attorney or a Firm for Representation?

    Be aware that there are a number of law firms that are reaching out to potential members of the class and offering representation services with the promise of streamlining the process. Essentially all such firms offer their services on a no-up-front-cost, contingency basis. Some even offer advance payments of the estimated expected settlement distributions. The fee for this service is typically 20% of the settlement amount.

    It is important to be aware that you do not need to retain the services of such a law firm in order to receive a potential benefit. You can “go direct” (as most class members do) and simply register as a member of the Class Action group directly on the formal website.

    Important Dates

    While the formal notice materials outline full details about timing, following is a summary of key dates:

    • Spring 2021: Formal notices sent (Some employers have indicated already receiving their notifications)
    • July 28, 2021: Deadline to Opt Out of Class Action Suit
    • November 5, 2021: Deadline to file to participate in the Class Action Suit

    Tips for Filing a Claim

    If you receive a formal notification, look for the Unique ID. While it is not absolutely necessary, having the Unique ID will make it easier to file a claim.

    Postcard Notice looks like this:
    Postcard Notice

    Email Notice looks like this:
    Email Notice

    The online claim form has many optional fields for both employers and employees, which is likely to spark questions from your work force. For example, the following are optional fields: member ID, group #, coverage dates, and allocation of premiums. Employees will be able to submit their online claim form without this information.  

    Required fields include the Health Plan Name (selected from a drop-down menu) and Employer Name. Employers may wish to proactively provide this information to employees to mitigate the number of questions received from individuals.

    Formal References

    Formal resources for the class action lawsuit can be found below. The website includes Frequently Asked Questions, important reference documents, and a link to file a claim.

    BCBS Lawsuit: The Details

    The Litigation

    The litigation was particularly hard-fought and expensive, with the production of over 15 million pages of documents, over 120 depositions, and over a dozen motions to dismiss the plaintiffs’ claims. The unique nature of this anti-trust lawsuit has been characterized in court papers as “historic.”

    What Was Alleged?

    This lawsuit alleges violations of the antitrust laws by the Blue Cross Blue Shield Association of health plans. It purports that that BCBS companies colluded to create territories within the US, an act that would be in violation of antitrust laws. The claim was that this resulted in individuals, insured group health plans, and self-funded plans paying higher premium and ASO costs than they would in a competitive market.

    Nitty Gritty Anti-Competition Details

    In addition to the settlement payment of nearly $2.7 billion to the class plaintiffs, BCBS agreed to modification of alleged anticompetitive practices. Specifically, BCBS agreed to remove two of the mechanisms that are “pretty flatly anticompetitive” with regard to Blue plan subscribers. First, the agreement would remove a BCBS Association rule that requires two-thirds of each Blue insurer’s total national revenue to come from Blue-branded plans. Second, BCBS agreed to remove the existing setup that requires national employer subscribers to work with a Blue insurer that covers the location of the employer’s headquarters. This new agreement would allow competition between a smaller, in-state Blue insurer and other out-of-state Blue insurer for large national employers.

    Potential Marketplace Impact

    While the monetary settlement in this case is significant, equally so is the potential impact on health insurance markets going forward. It is clear that there will be greater competition among the various BCBS companies going forward. However, potentially equally significant is that the new BCBS competition will likely stimulate a competitive response from other national and regional health insurance companies.

  • Healthcare and Employee Benefits in the Biden Era [Video]

    With the ongoing global pandemic and a new administration, legislative priorities continue to shift and are causing confusion for many employers. Join James Slotnick, Sun Life’s AVP of Government Relations, as he discusses how these dynamics could impact the employee benefits industry. He covers:

    • Ongoing legislative response to COVID-19
    • How Congress has both advanced and hindered President Biden’s priorities
    • Which employee benefits issues are likely to be most impacted by the Biden Administration
    • How the 2022 mid-terms could change President Biden’s agenda

    Note: The content of this presentation is not to be considered legal advice. We recommend Clients speak with legal counsel specializing in labor and employment law to ensure your organization meets requirements.



  • PPE Now Eligible As Medical Expense

    The IRS released Announcement 2021-7 which newly includes amounts paid for Personal Protective Equipment (PPE) as qualified medical expenses.

    Which Types of PPE are eligible?

    PPE such as masks, hand sanitizer, and sanitizing wipes are now eligible. The announcement does specify that the primary purpose of the PPE must be to prevent the spread of COVID-19.

    Which Plans?

    Technically, PPE was added as qualified medical expenses under IRC §213. Practically, this means that they are eligible under health FSAs, HSAs, and HRAs (if the HRA is structured to allow expenses beyond copays, deductibles, etc.).

    Effective Date

    Plans can be amended retroactively to January 1, 2020. To the extent that plans do not need to be formally amended, claims for PPE expenses would be eligible retroactively as well.

    Plan Amendments

    The IRS notice outlines that plans (including health FSAs and HRAs) need to be amended if they specifically prohibit reimbursement of PPE. Vita Flex Summary Plan Descriptions (SPDs) reference IRC §213 for eligible expense determinations, so Vita Flex plans will not require a specific amendment. Other plan communication materials currently list PPE as not eligible, so those materials will simply be updated by Vita.

    If a non-Vita Flex plan would need to be formally amended, the amendment can be retroactive. Such an amendment must be adopted no later than December 31, 2022 (in most circumstances).

    Participant Communication

    Employers should communicate the change in PPE eligibility. The Vita Flex participant portal is being updated with a banner to reflect this change in eligibility.

    No Double Dipping on Tax Return

    If the expense is reimbursed under an account-based plan, it is not deductible for the taxpayer under Section 213 (to the extent that the total medical expenses exceed 7.5% of the taxpayer’s adjusted gross income). In other words, no double dipping on the deductible expenses.

  • 2021 Absence Management Updates and Trends [Video]

    COVID has dramatically changed the workplace. Continued changes and long-term impacts around employee rights to leave, accommodations and more are sure to affect our world. Join Marjory Robertson, Assistant Vice President & Senior Counsel at Sun Life Financial, as she discusses a variety of employment law and compliance requirements, and likely absence and accommodation-related developments during 2021 under a new federal administration. She covers issues raised under the ADA, OSHA, FMLA, FLSA and other federal and state laws.
    Note: The content of this presentation is not to be considered legal advice. We recommend Clients speak with legal counsel specializing in labor and employment law to ensure your organization meets requirements.



  • American Rescue Plan Act: What Employers Need to Know [Video]

    The American Rescue Plan Act of 2021 is a massive piece of legislation (591 pages long!) that includes a plethora of relief measures that impact nearly every segment of society, including several that affect employers and their employee benefit programs. View this on-demand presentation highlighting the key employer provisions, including the COBRA Subsidy and the Dependent Care Max Increase. We outline employers' required critical actions and discuss Vita's administration solutions.


    Employer Resources