In many cases, former employees would be immediately eligible to enroll in a new employer's plan or under a spouse's plan following a job loss or loss of other employer-sponsored coverage. It appears that the employee would be eligible for the subsidy until any waiting period in the other employer's plan ends. What if the former employee satisfies the eligibility requirements for the other employer's plan but is not in an open enrollment or special enrollment window where he could actually enroll in the other plan? This would be consistent with situations where AEIs are not charged COBRA premiums, rather than cases where they receive cash that could be used to pay any required premiums or for any other purpose.Ī former employee is not "assistance eligible" if he is eligible for another employer's plan. Also, the Medicare tax credit under the ARPA is intended for the COBRA premiums "not paid" by the employee under the subsidy provisions of the ARPA. Employers may want to take note that a former employee who receives this type of cash payment may decide not to elect COBRA coverage at all, and therefore no tax credit would be available to the employer for the cash lump-sum severance payment. As noted above, the IRS is expected to release further guidance on the Medicare tax credit. If a company makes a taxable lump-sum cash payment intended to represent six months of COBRA premiums as part of a severance agreement, may the company claim a Medicare tax credit for the value of that lump-sum payment? Even if a former employee does not acknowledge eligibility for age-based Medicare, an employer could still deny eligibility for the subsidy. Furthermore, the notices are required to inform individuals about the $250 penalty they will face for electing subsidized COBRA if they are eligible for Medicare or another group health plan. The model notices issued by the DOL require individuals to indicate that they are not eligible for Medicare or another employer's plan. The assistance is not available to individuals who are eligible for Medicare or coverage under another employer's plan. An AEI is an individual who lost coverage due to a reduction in hours or involuntary termination, and who elects COBRA coverage. Under the ARPA, all AEIs are required to receive notification of their right to premium assistance.
The ARPA requires that subsidized COBRA coverage be offered even to those individuals who discontinued or never elected COBRA.ĭoes a second chance notice or subsidy eligibility notice go to all employees who lose coverage due to involuntary termination or a reduction in hours? What about those individuals that the company knows are eligible for Medicare or another employer's plan? Individuals are not eligible for COBRA while enrolled in other group health plan coverage, and individuals lose eligibility for the subsidy when they become eligible for other group health coverage.
The individual will be given a choice of COBRA coverage. Under the ARPA, assuming the individual was covered by a health plan at each employer, both companies are required to send COBRA notices and either company could be responsible for the ARPA subsidy for some or all of the subsidy period. Which company is required to send COBRA notices and offer fully subsidized COBRA? The employee went to another company, but his employment was recently terminated for poor performance. This includes a reduction in hours due to a medical or disability-related leave of absence.Īn employee was fired for poor performance last year. Any reduction in hours that leads to a loss of coverage is a COBRA qualifying event that would make an individual eligible for the premium subsidy. Is she an "Assistance Eligible Individual" (AEI) for purposes of the COBRA premium subsidy under the ARPA? At the end of the sixth month, medical benefits end under the terms of the plan, but the individual is still employed. Below are answers to some of the most common and interesting questions we've been asked.Īn employee is out on a medical leave for six months.
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