Blog

IRS_Notice_2021-31_Blog_header_1.jpg

IRS Notice 2021-31

On May 18, 2021, the IRS issued Notice 2021-31. The notice provides guidance on tax breaks under the 2021 American Rescue Plan Act (ARPA) for continuation health coverage under COBRA.

We realize it’s a bit overwhelming, but our senior legal counsel, Michelle Barki, summarized the main points covered in the 41-page document. So don’t be scared; we are here to help!

Notice 2021-31 Main Points:

1. Employers may require attestations to AEI status.

  • Any proof of eligibility records should be kept. 

2. Involuntary Termination, like ARRA, is broadly interpreted based on facts and circumstances.

3. Special enrollment period from April 1 - September 30, 2021.

  • ARPA extended election period continues for 60 days after individuals are provided notice of the extended election period.

4. Allows coverage if in a disability period extension.

5. Explains procedures to claim tax credit - Form 941 - or advance payments - Form 7200

6. Eligible health plans:

  • Group Health Plan
  • Vision
  • Dental
  • HRA
  • ICHRA

7. Non-eligible health plans:

  • FSA
  • QSEHRA

8. If an individual does not elect retroactive coverage at the same time they elect COBRA continuation coverage eligible for premium assistance, they do not get another election to do so – even if the Emergency Relief would have otherwise permitted a later election.

9. If the plan is no longer available at the time of termination, the closest plan will be considered.

10. If an employee elected a higher cost plan, they are not entitled to a COBRA subsidy at all.

11. If an employer provided a severance package to an employee, and it covered anytime during the subsidy period of April 1 – September 31, 2021, the employer should continue to pay the agreed-upon amount. The subsidy to the employee will cover the difference.

  • For example:
    • COMPANY 1 involuntarily terminated employee X due to lack of work on April 1, 2021. The employer agreed to pay COBRA premiums for three months to help employee X during a difficult time. COMPANY 1 pays COBRA for April, May, and June. The subsidy covers July, August, and September.
    • COMPANY 2 involuntarily terminated employee Y due to lack of work on April 1, 2021. The employer agreed to pay half the COBRA costs to help employee Y during a difficult time. COBRA costs $500. COMPANY 2 pays $250 for April – September, and the subsidy covers the other $250.

If you are interested in how Medcom can help you with COBRA administration or if you have any additional questions regarding the notice, please contact our COBRA team. We will continue to keep you updated on the latest from the IRS. In the meantime, follow us on LinkedIn, Facebook, and Twitter for more.