Mandatory Notice Requirements for COBRA Continuation

Christopher J. Kalbfell      May. 3, 2021

Photo of words COBRA Consolidated Omnibus Budget Reconciliation ActThe federal Consolidated Omnibus Budget Reconciliation Act (COBRA) gives workers and their families who lose their health benefits the right to choose to continue group health benefits provided by their group health plan for limited periods of time under certain circumstances, such as voluntary or involuntary job loss, reduction in the hours worked, transition between jobs, death, divorce, or other life events.

President Biden signed the American Rescue Plan Act of 2021 into law on March 11, 2021, which created a temporary subsidy for COBRA Continuation of Health Coverage insurance premiums for “assistance eligible individuals” that must be paid by employers (employers are then reimbursed through tax credits). The subsidy period starts April 1, 2021 and ends September 30, 2021. “Assistance eligible individuals” are those persons who have an involuntary termination or a reduction in hours in their employment, elect COBRA continuation insurance coverage, and are not eligible for Medicare or coverage under another group health plan.

Employers must do more than simply provide the COBRA subsidy to assistance eligible individuals. Employers are required to provide certain notices regarding the COBRA subsidy to the assistance eligible individuals. Employers who fail to provide the required notices can face penalties as much as $100.00 per qualified beneficiary for each day the employer is in violation. The Department of Labor has provided model notices for each COBRA notice required by the American Rescue Act of 2021 so that employers do not have to recreate the wheel and can be sure their notices comply with law.

Employers must identify all assistance eligible individuals and send an “Election Notice” with specific detailed information about the subsidy by May 31, 2021. The Model Notice published by the U.S. Department of Labor is available here.

Employers also must provide an “Extended Election Period Notice” to assistance eligible individuals who were involuntarily terminated or had a reduction in hours before April 1, 2021. This notice 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 Extended Election Period Notice is due to eligible employees by May 31, 2021, whether the individual is currently enrolled in COBRA, previously declined COBRA, or enrolled and later dropped COBRA. The Model Extended Election Period Notice published by the U.S. Department of Labor is available here.

The COBRA subsidy must also be made available to assistance eligible individuals covered by insured plans that are subject to state continuation requirements but not Federal COBRA requirements. Only individuals who elected to receive state continuation coverage within the state’s original time period will be eligible to receive the mini-COBRA subsidy, unless a state issues guidance permitting a second election period. These individuals still need to be informed of their rights and given an opportunity to elect the subsidy. In such a situation, the employer should provide an Alternative Election Notice. The Model Alternative Election Notice provided by the U.S. Department of Labor is available here.

Employers must also include with each of the above notices, the Summary of the COBRA Premium Assistance Provisions under the American Rescue Plan Act of 2021.

Finally, Employers must provide a “Subsidy Termination Notice” alerting assistance eligible individuals that the subsidy period is ending at least 15 to 45 days before the COBRA subsidy will expire. The Model Subsidy Termination Notice published by the U.S. Department of Labor is available here.

Employers should gather information and identify assistance eligible individuals to ensure that the required notices are provided before the deadline to avoid penalty. Employers should also use the Model Notices in links above to ensure that their notices are legally compliant.

Our team of attorneys is here to answer and assist you in navigating the rules regarding this temporary COBRA subsidy and the requirements of employers related to the mandatory notices and other related issues.

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