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The IRS has provided a second round of guidance on the provision in the American Rescue Plan Act which provides temporary premium assistance for COBRA continuation coverage and a credit to entities that maintain group health plans. Included in the new guidance is information on which a party should claim the credit in certain multi-party situations.
Section 9501 of the American Rescue Plan Act of 2021 (ARPA, PL 117-2) provides a temporary 100% reduction in the premium that individuals have to pay when they elect COBRA continuation health coverage following a reduction in hours or an involuntary termination of employment. The law provides a corresponding tax credit for the entities that maintain group health plans, such as employers, multiemployer plans, and insurers.
The 100% COBRA premium assistance, along with additional COBRA enrollment rights, are available to certain assistance eligible individuals during the period beginning on April 1, 2021 and ending on September 30, 2021.
In May 2021, IRS issued Notice 2021-31, which addressed several issues with respect to the above-described ARPA provisions, including defining “involuntary termination of employment,” and discussing which health coverage was covered by those provisions.
The questions addressed by the new guidance include availability of the premium assistance to individuals eligible for an extension who had not elected it; whether premium assistance for vision or dental-only coverage ends due to eligibility for other health coverage that does not include vision or dental benefits; availability of premium assistance under a State statute that limits continuation coverage to government employees; whether employers may claim the premium assistance tax credit if the Small Business Health Options Program (SHOP) exchange requires employers to pay COBRA premiums; and which party may claim the premium assistance tax credit in certain multi-party situations.
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