IRS Notice 2021-46 provides 11 additional FAQs about COBRA subsidies under the American Rescue Plan Act (ARPA). The guidance clarifies:
- Individuals whose initial 18 months of COBRA ended before April 1, 2021, but had Outbreak Period relief to notify the plan of a Social Security disability after April 1 should have the Outbreak Period relief honored to extend their COBRA past 18 months.
- Qualifying for new health insurance or Medicare does indeed cancel someone’s dental or vision COBRA subsidy, even if that other coverage doesn’t cover dental or vision expenses, because that’s what ARPA says and they have to follow the law.
- State continuation only offered to a subset of state residents still qualifies for the subsidy.
- For claiming the tax credit, the common law employer maintaining the plan is typically going to be the person’s common law employer, even if another entity (such as a PEO or MEWA) is actually sponsoring the plan. However, that may not be the case for a multiemployer union plan or a State agency arrangement for state and local governments.
- In states that mandate state continuation coverage must be offered after federal COBRA is exhausted, the employer claims the tax credit for all the continuation coverage, both the federal and state timeframes. Some employers buying SHOP Marketplace coverage also might be able to claim the tax credit if certain conditions are met.
- How to handle the tax credit in a merger/acquisition arrangement.
IMA will continue to monitor regulator guidance and offer meaningful, practical, timely information.
This material should not be considered as a substitute for legal, tax and/or actuarial advice. Contact the appropriate professional counsel for such matters. These materials are not exhaustive and are subject to possible changes in applicable laws, rules, and regulations and their interpretations.