COBRA Subsidies Ending and Employers Must Send Out Notices

The 100% COBRA health insurance subsidies for workers who lost their jobs during the COVID-19 pandemic are about to expire on Sept. 30, and that means employers who have former staff receiving those subsidies must notify them of their expiration.

If you have former employees who are still on COBRA benefits and receiving the subsidy that was required by the American Rescue Plan Act, you will need to send them a timely notice that the 100% subsidy will end at the end of September and that they will have to start paying premiums if they wish to continue coverage after it has ended.

The expiration notice must be sent out 15 to 45 days before the expiration of the subsidy or before COBRA benefits expire (laid-off employees are only eligible to purchase COBRA health insurance continuation coverage for 18 months after they are laid off or quit).

In other words, employers have to send out expiration notices to some former employees who have been receiving COBRA coverage that their 18 months is up.

Some employers should already have sent out expiration notices.

Employers or plan administrators must notify employees receiving COBRA subsidies no more than 45 days before Sept. 30 and no less than 15 days before they will lose the subsidy. Sept. 15 is the absolute last day to send the notices.

Who should you send notices to?

If you have any former employees who are receiving COBRA premium assistance you must send them an expiration notice, even if they have reached their maximum coverage period of 18 months.

There were three ways a former employee could qualify for the subsidy:

  • Eligible individuals who had a COBRA election in place as of April 1, 2021.
  • Eligible individuals who did not have a COBRA election in place (but were previously offered COBRA under federal law) could start to receive the subsidy on April 1.
  • Eligible individuals who experience a COBRA qualifying event between April 1 and Sept. 30.

What should the notice say?

The IRS has created a model expiration notice, which you can find here.

While it is not mandatory that you use the model notice, it’s a good idea, because using it demonstrates “good faith” compliance with the law.

Here are the details you’ll need to include in the notice:

  • Date of the notice.
  • Names or status of the beneficiary.
  • Name of the group health plan or insurance policy.
  • Whether the beneficiary is receiving the notice because their maximum COBRA continuation period is ending (18 months) or because the subsidy is expiring.
  • Date on which the maximum period of continuation coverage will end, or the date of the end of the COBRA subsidy. Depending on their premium period, their subsidized COBRA coverage can last beyond Sept. 30, according to the IRS.
    Under the rules, the subsidy continues until the end of the last “period of coverage” beginning on or before Sept. 30. In other words, if premiums are usually assessed on a monthly period basis, including the period from Sept. 26 to Oct. 26, the subsidy would cover the entire period ending on Oct. 26.
  • Monthly premium cost that the beneficiary must pay to keep their continuation coverage going after the subsidy expires. It must also include other coverage options.

DOL Issues Model COBRA Subsidy Notices

As you will recall, the American Rescue Plan Act of 2021 (ARPA) includes a 100% COBRA subsidy for people who were laid off during the COVID-19 pandemic.

As part of the law, which took effect April 1, the Department of Labor was required to issue model notices that employers can use to send to eligible former employees.

The ARPA requires that employees laid off or who saw their hours cut during the pandemic to the point they no longer qualified for group health insurance, are eligible for COBRA continuation coverage that is 100% subsidized.

Model notices

The ARPA required the DOL to create three model notices (general, election and termination of the subsidy). 

Employers are allowed to use their own notices as long as they satisfy the COBRA notice content requirements.

As with all model notices created by the DOL, employers will need to fill in the blanks for their own COBRA plan and can rely on the boilerplate verbiage to avoid running afoul of regulations. The DOL created four notices in total:

Model general ARPA COBRA notice — This form is to be provided to qualified beneficiaries who have a qualifying event (termination or reduction in hours) between April 1 and Sept. 30. You can download it here.

Model COBRA notice with extended election periods — This form is to be provided to individuals who may be eligible for the COBRA subsidy if they had a qualifying event that took place prior to April 1. You can download it here.

Model alternative notice — This form can be provided to individuals with insured coverage subject to state continuation coverage, who have a qualifying event between April 1 and Sept. 30. The form can be downloaded here.

Model notice of expiration of premium assistance subsidy — This form should be sent to individuals whose COBRA subsidy will end before Sept. 30. You can download it here.

Summary of major provisions and form

The DOL also released a document called the Summary of the COBRA Premium Assistance Provisions under the American Rescue Plan Act of 2021. 

This four-page document is designed to be completed by the employer (or your COBRA plan administrator) and included with any COBRA assistance notice that is sent to an eligible terminated worker. The document includes a summary of the major provisions of the law pertaining to the 100% COBRA subsidy.

The employer must include the name of the COBRA administrator in this document. The document also contains a few pages that will allow a terminated employee to ask to be treated as an eligible beneficiary if the employer has not yet done so.

Once the completed forms have been returned, the employer will complete a section indicating if the request is approved or denied, and if denied, the reason for the denial.

The takeaway

You should review these model notices so you don’t run afoul of the law. You’ll want to make sure that you have sent notices to all of the eligible employees.

If you are using the model notices, ensure that you include all of the relevant information for your own plan.

If you are using your own notices, compare them to the model notices and review the guidance to make sure yours include all the content the forms are required to have.

The DOL notes in its FAQs that it considers the use of the model election notices to be in good-faith compliance with the law.