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IRS Provides Long-awaited Guidance on COBRA Subsidy

Back in March, Sentinel sent out a Sentinel Alert regarding the American Rescue Plan Act (“ARPA”). The ARPA contained a provision that offers subsidized COBRA for certain eligible individuals (“Assistance Eligible Individuals” or “AEIs”) from April 1, 2021 through September 30, 2021.

This week, the IRS issued Notice 2021-31 to provide answers to many of the outstanding questions that arose after the ARPA was released.

In total, the Notice (which is formatted as a Q&A) addresses 86 different points of potential confusion. The various topics covered in the Notice include the following:

  • Clear definitions and scenarios where an individual is and is not eligible for the subsidy [Q-1 through Q-3, Q-8 through Q-20]
  • Employer requirements for reliance on an individual’s attestation and maintaining records [Q-4 through Q-7]
  • Confirmation as to how the subsidy applies to other COBRA Qualifying Event types (divorce, death, dependent age-out) and scenarios (second Qualifying Events, disability determination, State mini-COBRA laws) [Q-8, Q-14, Q-17, Q-33]
  • Clarification as to how employers can apply the reduction in hours and involuntary termination definitions [Q-21 through Q-34]
  • COBRA plans eligible for premium assistance [Q-35 through Q-42]
  • Beginning and end of the COBRA subsidy period [Q-43 through Q-50]
  • Extended election periods [Q-51 through Q-59]
  • Calculating and claiming the premium assistance credit [Q-63 through Q-86]

While there is much to digest from the guidance, employers should read the Notice carefully as there are many scenarios for consideration applicable to each organization. Please feel free to contact your Sentinel COBRA Account Manager should you wish to discuss any specific scenario and/or items addressed in the Notice.

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