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Employer’s Responsibility for New COBRA Subsidy Notifications

We know as employers you have a lot on your plate right now, and unfortunately we are going to add some parmesan, but know we are here to help in any way we can.  You may have been seeing in the news about this new COBRA subsidy that will allow for former employees who were involuntarily terminated or experienced a reduction in hours to get “free” COBRA for six months (April 1-Sept 30).  That isn’t just smoke and mirrors, it is true, but it will require some work on your end. 

Below is the game plan:

1. Did you have any former employee that their coverage was lost due to involuntary job loss or a reduction in hours of work who is still covered by COBRA? (typically anyone terminated since November 2019)
2. If the answer to #1 was yes, then you are going to have to send the attached notices to all of the former employees by May 31^st, 2021 or be subject to a penalty that is yet to be determined.
3. If the answer is currently no however layoffs will occur between April 1- September 30^th, please refer to the attached documents for your updated COBRA notice that will need to be sent to the employee being laid off or reduced hours.

So what does this mean if you are on the hook to send these notices?

1. That the COBRA qualified individual is not eligible for a subsidy if they can obtain coverage under another group plan or Medicare.
2. The subsidy is only available for someone that that has been involuntarily terminated (not for gross misconduct) or had a reduction in hours.

Who pays?

• For employers with 20+ employees, the premium assistance will be delivered through the employer paying COBRA premiums to the insurance carrier (or covering the cost of providing COBRA coverage under a self-insured plan) and then taking a payroll tax credit to recoup the cost of covering COBRA premiums or costs.  Employers will treat the subsidy as a credit against the employer’s share of Medicare tax under Internal Revenue Code Section 3111(b). 
• If the credit exceeds the taxes owed for a quarter, the excess will be refundable.

*Please discuss with your CPA for more information regarding the tax credit/refundable amounts.

So what do I have to do again?

1. Fill out the “Alternative Notice” that is attached (just the areas that are highlighted)
2. Send that out via email or first class mail along with the Summary of Provisions Application & the COBRA application by May 31, 2021 – the former employee will have 60 days from the date received to send back the applications to you.  Flip them to us when you get them. 
3. Also, send the “Summary of COBRA Premium Assistance Provision” that includes the form to request the premium assistance as an Assistance Eligible Individual.
4. You’ll have to send one more notice out, the “Notice of Expiration of Period of Premium Assistance” notice that has to hit their inbox between August 15 – September 15 to remind them to drop the COBRA if they do not have any intentions of paying for it after the subsidy is over.

Know that this is ever evolving and that there will be a lot of questions coming down the pike.  We are in your corner as always to help.  Still have questions?  Click Here for common FAQs!

Looking for the packet of sample notices? Download the packet at the hyperlink below!

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