There is another group of “assistance eligible individuals”: if an employee declined COBRA coverage, or if the employee elected COBRA coverage and later discontinued it, the employee now has a second chance to elect coverage and receive the subsidy (if the eighteen monthly COBRA eligibility period has not expired). Such employees must receive a notice of the right to elect subsidized coverage before May 31, 2021. The coverage will end when COBRA eligibility ends. These individuals can elect to begin the subsidized coverage on April 1, 2021, even if they return the election form after April 1.
Employers must provide a notice to both types of “assistance eligible individuals”, which necessarily includes employees who are involuntarily terminated, or who suffer a reduction of hours, between April 1, 2021 and September 30, 2021; and employees who were terminated between October 1, 2019 and April 1, 2021, who have not exhausted their COBRA coverage, and who declined COBRA coverage or discontinued it. Those individuals are entitled to reapply for COBRA benefits subject to the subsidy. Note that employees are not entitled to a refund of premiums already paid, and are not entitled to the subsidy if they are eligible for coverage under another plan (such as a spouse’s or new employer’s plan) or for Medicare.
The Department of Labor has issued forms of Notice for employers to provide to “assistance eligible individuals.” The notice must include forms necessary to establish eligibility, plan administrator information, a description of the additional election period, a description of the requirement to notify the employer or plan if the employee obtains additional coverage, and a description of the right to receive premium assistance and the requirements for entitlement. They can be found on the Department of Labor’s website.
Other action by the Department of Labor may complicate the application of the subsidy. In May 2020, the Department of Labor issued guidance that employers and employee benefit plans were required to disregard the “Outbreak Period”, that is, the period of the Covid-19 National Emergency, in determining deadlines for COBRA election periods (among other things). The guidance provided the Department of Labor on the COBRA subsidy states that the Outbreak Period guidance does not apply to this subsidy. The employee may still be eligible for COBRA pursuant to the Outbreak Period guidance, but they will not be eligible for the subsidy.
The Act permits employees to elect a different coverage option offered by the same employer, if the employer chooses to make this option available. The employee is entitled to the premium subsidy for the different plan provided that the premium for the different coverage is the same or lower than the premium for the coverage the employee had at the time of termination or reduction in hours. The notice must notify the employee of the right to select different coverage.
Although DOL issued guidance and model forms, there are still no regulations that would help to address some compliance issues ARPA creates for employers. The obligation on employers to identify previously terminated employees (that is, prior to April 1, 2021) who may now be eligible for the subsidy, and to provide notice to those individuals may present issues. While the Department of Labor has generated a form for individuals to request an application for the COBRA subsidy, the process of identifying “assistance eligible individuals” terminated prior to April 1, 2021, and providing them with notice by the deadline may well be daunting.
Complicating matters is the fact that many employers provided COBRA premium payments as a part of severance agreements. Department of Labor has provided no guidance as to whether the employer is entitled to the tax credit under these circumstances, or whether the employee is eligible for the subsidy nonetheless. This is the challenge for employees terminated prior to April 1, 2021. For employees terminated after April 1, 2021, the promise of the payment of COBRA premiums (at least until Septmeber 30, 2021) cannot provide consideration for a release of claims.
And, of course, many Covid – related terminations do not fit neatly into “voluntary” or “involuntary” terminations - employers were creative and interactive with employees in designating employees for terminations. The regulations provide no guidance regarding these mutual separations.
Employers should update their Notices as required by the Department of Labor, and take steps to identify “assistance eligible individuals” terminated prior to April 1, 2021. Employers will need to review severance agreements executed during the pandemic to assess whether there are other eligible employees under those agreements, or whether those rights have been released. Finally, employers will need to await guidance on the application of the Medicare tax credit. Of course, employers will scramble to comply quickly with these new rules, but the obligation to provide the subsidy will terminate on September 30, 2021.
Patricia Collins is a Partner and Employment Law Chair with Antheil Maslow & MacMinn, LLP, based in Doylestown, PA. Her practice focuses primarily on employment, commercial litigation and health care law. For advice on employment law issues relating to the COVID-19 crisis, or any employment law matters, contact Patricia Collins, 215.230.7500 ext. 126, or visit www.ammlaw.com.