Final Thoughts on the New (and Temporary) COBRA Subsidy


Final Thoughts on the New (and Temporary) COBRA Subsidy

Recently, the Department of Labor released the final model COBRA Notices for the new subsidy created under the Americans Rescue Plan Act of 2021 (“ARPA”). This new subsidy requires plans to cover the full COBRA cost between April 1, 2021 and September 30. 2021 for eligible participants. ARPA also requires plans to send out updated COBRA notices to eligible participants that explain the new subsidy.

Recently, the Department of Labor released model notices that plans can use to fulfill these new notification requirements. The model notices can be found at: There are three separate notices that plans must use: (A) One for participants eligible for COBRA on or after April 1, 2021; (B) Another for participants that previously declined COBRA or terminated due to non-payment and who are now eligible to make a second COBRA election; and (C) a termination notice describing the end of the subsidy.

Now that we have the model notices, plans should take note of the following considerations:

  • Getting the Notices out Quickly – The new law gives Participants sixty (60) days after receiving the notice to elect the subsidized COBRA coverage. The coverage can then be retroactive to April 1, 2021. ARPA requires Plan to provide the notices no later than May 31, 2021. However, by sending the notices out as soon as possible, plans can begin the sixty (60) day election period for eligible participants. If plans wait until the end of May to send out the notices, the sixty (60) election window could extend into July 2021.
  • Termination Notices – As mentioned above, plans are also required to send a termination notice that announces the end of the subsidy. This notice must be provided between 15-to-45 days before the subsidy ends. That means the termination notice will be provided throughout the subsidy period at various times depending on when an individual would lose the subsidy. For those that are eligible for the full subsidy (i.e., April 2020 to September 2020), this notice does not need to be delivered until September 15, 2021. However, it will need to go out almost immediately for those who are only eligible for one or two months of subsidized coverage. For example, if a participant is only eligible for subsidized coverage for April and May, he or she would receive two notices in short succession; one notifying them of the COBRA subsidy and another informing them when the subsidy ends.

After distributing the new COBRA notices, plans must turn their attention to reporting the subsidized cost on quarterly IRS Form 941 tax filings. The IRS is expected to issue additional guidance on reporting requirements before the end of the 2nd quarter 2021.