COVID-19 Resources

COBRA Subsidies Under the American Rescue Plan of 2021 (Frequently Asked Questions)

Written by Dianne Wilson on April 7, 2021

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The American Rescue Plan Act of 2021, the most recent stimulus and COVID-19 relief package, requires employers to extend offers of free COBRA coverage to certain qualified employees from April 1 through September 30, 2021.

What employees are eligible?

The subsidy applies to any eligible former employee and their qualified dependents whose COBRA eligibility falls during the period between April 1 and September 30, 2021. The subsidy will not apply to any employee who resigned from their position or who was terminated for gross misconduct.

Terminated employees who previously did not elect coverage or stopped coverage will be allowed to enroll during a special 60-day enrollment period as long as they are still within their 18 months of eligibility. Employees cannot enroll if they are covered under another qualified employer plan.

The law requires employers to extend offers of COBRA coverage to other individuals whose right to COBRA coverage previously ended which means that the termination of employment could have occurred as far back as November of 2019.

Are there financial provisions?

This legislation provides tax credits to employers to offset the costs of this coverage.

What are companies required to provide to employees to notify them?

Employers must provide COBRA notices to employees no later than May 30, 2021. These notices must include information regarding the subsidy and the new special enrollment period for qualified employees and their beneficiaries. Once the notice is provided, the qualified employee and dependents will have 60 days to enroll. Coverage will then be retroactive to April 1, 2021.

The Department of Labor has been instructed to provide model notices no later than mid-April.

What are the next steps for companies?

Contact your COBRA provider (if you have one) to start a plan of action.  If you have a fully-insured plan, your carrier will most likely handle this for you, but it’s important to contact your carrier to confirm this.

If you are self-insured, the burden may lie with you, so it’s important to determine who will handle this task as soon as possible and identify those former employees who will need to get notices.

What is the penalty for non-compliance?

The penalty for non-compliance generally is $250 per incident or more if the failure is intentional.

Where can I get more information?

More information will be available as DOL provides guidance.

Warren Averett will continue to monitor relevant updates. If you would like to learn more about how your organization may be impacted, reach out to your Warren Averett advisor directly, or ask a member of our team to reach out to you.


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