IRS Releases Further Guidance on COBRA Continuation Coverage
The IRS recently issued a notice that further clarifies the usage of Consolidated Omnibus Budget Reconciliation Act (COBRA) coverage as amended via the American Rescue Plan (ARP).
IRS Notice 2021-46 expands on 2021-31 and identifies several parameters around COBRA continuation coverage in a question and answers format. Before diving into the specifics, it’s important to note how the ARP created changes to COBRA coverage for select individuals.
First, the ARP allows for individuals who declined COBRA coverage, or previously elected to receive COBRA but discontinued it, the opportunity to enroll in the coverage a second time.
In addition, certain “Assistance Eligible Individuals” can receive 100% paid for COBRA coverage for the duration of April 1, 2021, through September 30, 2021. Individuals’ former employers are responsible for paying the upfront costs. The federal government will then reimburse the employers at a later time.
Notice 2021-46 specifically outlines certain situations in which individuals are identified as “assistance eligible” and qualify to receive COBRA premium assistance. People who experience either a disability determination, second qualifying event, extension under State mini-COBRA following a reduction in hours, or involuntary termination, during the time frame in which they were initially eligible for COBRA essentially have their COBRA eligibility period extended.
So long as the time frame for COBRA coverage falls within the April 1 and September 30, 2021 time frame and the employees experience another qualifying event – they can be eligible to receive COBRA premium assistance coverage.
The notice provides the following example for clarification:
“An individual who was provided a COBRA general notice is involuntarily terminated and elects COBRA continuation coverage effective October 1, 2019; the individual’s 18-month COBRA continuation period lapses March 31, 2021. On March 1, 2020, a disability determination letter is issued by the Social Security Administration providing that the individual was disabled as of November 1, 2019. The disability determination entitles the individual to the 29-month extended COBRA continuation coverage. The individual fails to notify the plan of the disability determination by April 30, 2020, which is 60 days after the date of the issuance of the disability determination letter as required under § 4980B(f)(6)(C). However, under the Emergency Relief Notices, the individual has one year and 60 days from the issuance of the disability determination letter to notify the plan of the disability to extend COBRA continuation coverage. On April 10, 2021, the individual notifies the plan of the disability and elects ongoing coverage from April 1, 2021. Assuming the individual is not eligible for other disqualifying group health plan coverage or Medicare, the individual is an Assistance Eligible Individual and is entitled to the COBRA premium assistance.”
Certain nuances around dental, vision and medical COBRA coverage are also identified in the notice. Individuals receiving dental and vision coverage through assistance eligible COBRA continuation coverage cannot continue to receive these benefits if they “become eligible to enroll in other disqualifying group health plans coverage or Medicare that does not provide dental or vision benefits.”
In other words, individuals cannot 1) obtain medical and vision through COBRA premium assistance and 2) receive Medicare/Medicaid at the same time. The notice makes clear that it’s one or the other.
Other issues relating to COBRA premium assistance are identified in the notice, including:
- The comparison of state continuation coverage programs and federal COBRA contribution coverage
- Details for which types of employers can claim the COBRA premium assistance credit and under what circumstances
As a reminder, employers are required to notify eligible individuals about the opportunity to obtain COBRA coverage, in addition to paying the upfront premium costs for individuals that obtain COBRA premium assistance.
If your organization needs assistance meeting the requirements of the COBRA continuation coverage, contact us to learn about ACA Complete. In addition to fully understanding the continuation coverage specifics, we can help you comply with the ACA’s Employer Mandate.
Under the ACA’s Employer Mandate, Applicable Large Employers (ALEs) are employers with 50 or more full-time employees and full-time equivalent employees. ALEs are required to:
- Offer Minimum Essential Coverage (MEC) to at least 95% of their full-time workforce (and their dependents) whereby such coverage meets Minimum Value (MV)
- Ensure that the coverage is deemed affordable based on one of the IRS-approved methods for calculating affordability
Failure to adhere to these two requirements could subject your organization to Internal Revenue Code (IRC) Section 4980H penalties. We can calculate your ACA compliance score for free to see if you’re currently exposed to any IRS penalty risk.
To learn about the ACA’s Employer Mandate responsibilities, including federal and state filing deadlines, download the 2021 ACA Essential Guide for Employers.
For information on ACA penalty amounts, affordability percentages, important filing deadlines, steps for responding to penalty notices, and best practices for minimizing IRS penalty risk, download the ACA 101 Toolkit.
