The most recent COVID-19 relief bill, the American Rescue Plan Act (ARPA), was signed into law on March 11. Among other relief provided in the bill, ARPA includes a much-anticipated COBRA premium subsidy applicable to group health plan sponsors. While the DOL has issued some guidance and model notices, which were discussed on April 15 during Session One, we anticipate receiving more guidance from the IRS before Session Two. We expect that guidance to provide information about how to determine whether a termination was involuntary vs. voluntary for purposes of determining “assistance eligible individuals” and to answer a number of other open questions, including the following, about the tax credit employers are permitted to take in connection with the COBRA subsidy:

• What type and form of documentation must employers create and retain as support for the tax credit taken?
• To what extent can the tax credit include the cost of the subsidy where continuation of coverage is mandated under state but not federal benefits continuation laws?
• To what extent can the tax credit include the 2% COBRA administration fee?
• To what extent can the employer claim the tax credit for any portion of the cost of coverage that it voluntarily agreed to subsidize pursuant to a severance agreement or plan?
• When and how can the tax credit can be taken and what is the process for obtaining a refund in the event the credit amount exceeds the amount of payroll taxes otherwise due?

Presenters:

• Laura Ryan, Partner
• David Uhlendorff, Associate