May 27, 2021
Employment Alert: 
New IRS Guidance on American Rescue Plan Act Temporary COBRA Premium SubsidyAnd Deadline Reminder for Notices Due May 31, 2021
Millions of workers have lost jobs and, consequently, their healthcare coverage during the pandemic. To help address this widespread loss of coverage, Section 9501 of the American Rescue Plan Act of 2021 (“ARPA”), signed into law by President Biden on March 11, 2021, requires, among other things, that employers or plan sponsors provide a 100% COBRA premium subsidy to certain individuals who elect COBRA continuation coverage due to a loss of health coverage as the result of a reduction in hours or an involuntary termination of employment for periods of coverage from April 1, 2021, through September 30, 2021. (The temporary premium assistance is also available to individuals enrolled in continuation health coverage under State programs that provide for coverage comparable to COBRA continuation coverage, often referred to as “mini-COBRA.”) An employer or plan required to comply is entitled to a tax credit for the amount of the premium assistance.

On April 7, 2021, the U.S. Department of Labor (DOL) issued its answers to “Frequently Asked Questions” regarding implementation of the COBRA subsidy requirements, along with model notices to assist employers and plans in complying with the new law. (The DOL’s FAQs are linked here.

Just last week, on May 18, 2021, the IRS issued additional guidance, including 86 questions and answers, further clarifying the new requirements. (The new IRS Notice 2021-31 is linked here.

In addition to providing these new guidance materials, we also want to provide a few important takeaways and remind employers of the imminent May 31, 2021, deadline to provide notices to some individuals.

DEADLINES FOR NOTICES (Including an important May 31, 2021, deadline):

Employers should take steps to make sure that either the employer or the plan administrator is providing all required notices to qualified beneficiaries regarding the premium assistance and other information about their rights under the ARPA. (The DOL’s model notices can be found here.) The required notices include:

  • A general notice to all qualified beneficiaries who have a qualifying event that is a reduction in hours or an involuntary termination of employment from April 1, 2021 through September 30, 2021. This notice may be provided separately or with the COBRA election notice following a COBRA qualifying event. 

  • A notice of the extended COBRA election period to any “Assistance Eligible Individual” (or any individual who would be an Assistance Eligible Individual if a COBRA continuation coverage election were in effect) who had a qualifying event before April 1, 2021. This requirement does not include those individuals whose maximum COBRA continuation coverage period, if COBRA had been elected or not discontinued, would have ended before April 1, 2021 (generally, those with applicable qualifying events before October 1, 2019). This notice must be provided within 60 days following April 1, 2021 (that is, by May 31, 2021). Therefore, employers should quickly identify all potential Assistance Eligible Individuals—all involuntary terminations, or employees who lost health coverage due to reductions in hours, occurring since October 1, 2019—and ensure that those individuals are provided with this required notice.

  • A notice of expiration of periods of premium assistance explaining that the premium assistance for the individual will expire soon, the date of the expiration, and that the individual may be eligible for coverage without any premium assistance through COBRA continuation coverage or coverage under a group health plan. This notice must be provided 15 to 45 days before the individual’s premium assistance expires.


Who is an “Assistance Eligible Individual”?

An Assistance Eligible Individual is any qualifying plan participant who loses, or has lost, health insurance coverage due to an involuntary termination (other than for gross misconduct) or a reduction in hours worked, and who elects continuation coverage to be effective during the period of April 1, 2021, and September 30, 2021.

Qualifying events other than a reduction in hours or an involuntary termination of employment, such as divorce or a covered dependent child ceasing to be a dependent child under the generally applicable terms of the plan (such as loss of dependent status due to aging out of eligibility), are not events qualifying an individual for COBRA premium assistance.

An individual can become an Assistance Eligible Individual more than once.

When is the premium assistance available?

The COBRA premium assistance is available as of the first period of coverage beginning on or after April 1, 2021, and will not be available for periods of coverage beginning after September 30, 2021. For each Assistance Eligible Individual, the COBRA premium assistance does not extend beyond the period of COBRA continuation coverage in the event that the period ends prior to September 30, 2021. 

Additionally, premium assistance is not available if an individual is eligible for coverage under any other group health plan or for Medicare. If an individual receiving premium assistance becomes eligible for coverage under any other group health plan or for Medicare, the premium assistance period ends.

ARPA provides an extended election period for certain individuals who did not have an election of COBRA continuation coverage in effect on April 1, 2021. The extended election period is available for an individual who would be an Assistance Eligible Individual if the individual had a COBRA continuation coverage election in effect on April 1, 2021, or an individual who previously elected COBRA continuation coverage and discontinued that coverage before April 1, 2021. The extended election period continues for 60 days after these individuals are provided notice of the extended election period. The resulting COBRA continuation coverage does not extend beyond the maximum period of COBRA continuation coverage that would have been required under the applicable COBRA continuation coverage provision if the individual had elected COBRA continuation coverage initially as required under that applicable COBRA provision, or had not discontinued the elected COBRA continuation coverage. 

Note that, if a qualified beneficiary was previously offered COBRA continuation coverage with respect to both comprehensive health coverage and dental-only or vision-only coverage and the qualified beneficiary elected COBRA continuation coverage only with respect to the dental-only or vision-only coverage, the qualified beneficiary is still a potential Assistance Eligible Individual who must be offered the ARPA extended election with respect to the comprehensive health coverage. If the qualified beneficiary elects additional COBRA continuation coverage pursuant to the ARPA extended election period, the qualified beneficiary is an Assistance Eligible Individual with respect to all elected COBRA continuation coverage.


The employer, insurer, or multiemployer plan, as applicable, who pays the subsidy is entitled to a refundable tax credit against its share of Medicare taxes. 

Under newly added § 6432 of the Code, the “person to whom premiums are payable for continuation coverage” is allowed a “premium assistance credit” for each calendar quarter against the tax imposed by 26 U.S. Code § 3111(b), in an amount equal to the premiums not paid by Assistance Eligible Individuals for COBRA continuation coverage with respect to that calendar quarter. 

A premium payee claims the credit by reporting the credit and the number of individuals receiving COBRA premium assistance on the designated lines of its federal employment tax return(s), usually Form 941, Employer’s Quarterly Federal Tax Return. (See IRS Notice 2021-31, Q-71 through Q-86, for more guidance on how to claim the tax credit.)

If you have any employment law questions, please contact Trish Walsh, Kelly Tilden, Kim McGair, or Jon Himes.

Trish Walsh focuses her practice in the areas of litigation and employment law, protecting clients' interests inside and outside the courtroom. In her employment practice, Trish drafts, audits and updates policy handbooks and provides advice on employment issues under Oregon, Washington and federal laws.

Contact Trish at 503.228.6044 or

Kelly Tilden  focuses her practice in the areas of employment law, business, and litigation. She advises clients regarding the hiring, discipline and termination of employees, compliance with state and federal civil rights, wage and hour laws, and leave laws. Kelly offers practical guidance and experienced-based insight to help employers confidently apply state and federal regulations. She has been selected by her peers for inclusion in the Best Lawyers in America® 2018-2021 for Employment Law - Management.

Contact Kelly at 503.228.6044 or
Kim McGair's practice emphasizes a wide range of litigation matters including employment, commercial litigation, commercial collections, personal injury defense, and real estate litigation. She is an advocate for her clients and provides them with sensible advice and strong representation to protect their interests and help them achieve their objectives as efficiently as possible. Kim was selected by her peers for inclusion in the Best Lawyers in America® 2018-2021 for Commercial Litigation and to the Oregon Super Lawyers list 2019-2020 for Commercial Litigation.

Contact Kim at 503.228.6044 or
Jon Himes practices in several areas including litigation, employment, and financial services, enabling him to assist clients with a full-range of legal and business challenges. His employment practice focuses on employment litigation and wage and hour laws. 
Contact Jon at 503.228.6044 or
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The contents of this publication are intended for general information only and should not be construed as legal advice or opinion on specific facts and circumstances.