Immediate COBRA Premium Subsidy Kicks In April 1 for Involuntarily Terminated or Reduced Hour Employees
Highlights
Employees covered by a group health plan who lose coverage due to involuntarily termination of employment (without gross misconduct) or an involuntary reduction in hours may be eligible for a COBRA premium subsidy for up to six months
The employers who pay the COBRA premium subsidy receive a tax credit for the subsidies as part of American Rescue Plan Act
New notices are required in some instances as soon as May 30, 2021
Starting April 1, 2021, employers who sponsor group health plans, both self-funded and fully insured, will need to pay for the entire cost of the group health plan COBRA continuation coverage (COBRA premium subsidy) for a period of up to six months if an employee was involuntarily terminated from employment (without gross misconduct) or lost coverage due to an involuntary reduction in hours and is still within the COBRA continuation coverage maximum period. The employer, however, may receive a tax credit in the amount of the COBRA premium subsidy. The subsidy and related tax credit are provisions under the American Rescue Plan Act, which was signed into law on March 11, 2021.
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