On May 18, the IRS released Notice 2021-31. The notice contains detailed guidance on subsidies employers must provide COBRA beneficiaries pursuant to the American Rescue Plan Act (“ARP”), and uses a Q&A format to illustrate several specific examples and potential issues regarding the subsidies. For employers, one of the many issues of interest addressed in this notice is the determination of which employee departures qualify as involuntary terminations triggering COBRA assistance. For example, resignations due to impending material geographic change in employment location or to accept severance prior to an impending layoff are involuntary departures, while retirements (of the employee’s own volition) and terminations for gross misconduct are not. Another issue is the “lookback” for individuals who are on COBRA, or still eligible for a subsidy. For example, an individual that is single at the time of termination and later gets married (or otherwise accrues dependents) is only eligible to receive a subsidy for him or herself, not other individuals that may be added to their plan. Ballard Spahr has a comprehensive summary of the IRS notice here.
For a discussion of the ARP’s initial impact on employers please see our alert here, and the Department of Labor’s guidance here. Employers should consult with their employment and employee benefits counsel to make sure that their company’s policies and practices with regard to COBRA subsidies comply with the ARP and federal government directives.