IMPORTANT CLIENT ALERT

NOTICE REQUIRED BY MAY 31ST TO FORMER EMPLOYEES ELIGIBLE FOR COBRA WITHIN THE LAST 18 MONTHS

The American Rescue Plan Act of 2021 (ARPA), signed into law on March 11, 2021, extends and enhances key programs under the CARES Act and provides additional relief to employers and businesses. Among other things, ARPA provides a 100% subsidy for COBRA premiums from April 1 to September 30, 2021.

An obscure provision found in the ARPA requires employers to send notices to employees who, during the last 18 months, were eligible for COBRA due to involuntary termination or a reduction in work hours but did not elect coverage at the time. The ARPA notice must explain that former employees have another chance to choose COBRA benefits with the benefit of the subsidy. Those who previously elected COBRA coverage can also take advantage of the federal government’s subsidy between April 1 and September 30, 2021 unless their 18-month COBRA eligibility period ended sooner or they became ineligible for other reasons. Employers are required to mail notices by May 31, 2021.

Employers are required to pay the full cost of the former employee’s COBRA premiums and then obtain reimbursement through payroll tax credits.

The employer is also responsible for picking up the premiums of former employees who have already elected COBRA and are currently receiving benefits through September 30, 2021. These are also reimbursable through payroll tax credits.

For help with this notice and understanding your legal obligations, please contact our Employment & Labor Law Group.