The IRS has issued additional guidance (Notice 2021-46) related to ARPA premium subsidies. Much of the guidance is very detailed and applicable to narrow situations. However, several questions are more widely applicable. Following is a summary of the items that would be of general interest to most employers.
ARPA Subsidy for Longer-than-18-Month COBRA Events
If the original qualifying event was a reduction in hours or an involuntary termination of employment, the COBRA subsidy is available to an individual who is entitled to elect COBRA continuation coverage for an extended period due to a disability determination, second qualifying event, or an extension under State mini-COBRA. The extended period of coverage must fall between April 1, 2021 and September 30, 2021. However, the subsidy is available even if the individual had not notified the plan or insurer of the intent to elect extended COBRA continuation coverage before the start of that period.
Disqualifying Coverage
Eligibility for the COBRA subsidy ends when an Assistance Eligible Individual becomes eligible for coverage under any other disqualifying group health plan or Medicare. This is true even if the other coverage does not include all of the benefits provided by the previously elected COBRA continuation coverage. For example, eligibility for Medicare, which generally does not provide vision or dental coverage, ends eligibility for the premium subsidy related to all previously elected COBRA continuation coverage.
Controlled Groups
If a plan subject to Federal COBRA covers employees of who are members of a controlled group, each employer that is a member of the controlled group is the premium payee entitled to claim the COBRA subsidy with respect to its employees or former employees. Although all of the members of a controlled group are treated as a single employer for employee benefit purposes, each is a separate employer for employment tax purposes.
Business Reorganization
In the event of a business reorganization (stock or asset sale), if the selling group remains obligated to make COBRA coverage available to M&A qualified beneficiaries, the entity in the selling group that maintains the group health plan is the premium payee entitled to claim the COBRA subsidy. If the employer (which may be an entity in the buying group) is not obligated to make COBRA continuation coverage available to Assistance Eligible Individuals, the employer is not entitled to the COBRA subsidy after the business reorganization.
