THE IRS ISSUED ADDITIONAL GUIDANCE ON COBRA PREMIUM ASSISTANCE AND TAX CREDITS

The Internal Revenue Service issued additional guidance on COBRA Premium Assistance and Tax Credits

The Internal Revenue Service (IRS) issued Notice 2021-31 providing guidance on tax credits available as premium assistance for COBRA continuation coverage enacted as part of the American Rescue Plan Act of 2021. Notice 2021-31 provides guidance for employers, plan administrators, and health insurers regarding the new credit available to them for providing continuation health coverage to certain individuals under COBRA.

Under section 9501 of the American Rescue Plan Act, a 100% reduction in the total cost of premium is available to “assistance eligible individuals” enrolling in COBRA continuation coverage for the months between April 1, 2021 and September 30, 2021. The cost is paid for by a federal payroll tax credit available to employers, multi-employer plans, or health insurers offering group health plans, depending on the type of plan. Under the Act, the credit is also available to reimburse the premium cost of state continuation coverage, sometimes called “Mini-COBRA.”

Notice 2021-31 provides information regarding the calculation of the credit, the eligibility of individuals, the premium assistance period, and other information vital to employers, plan administrators, and insurers to understand the credit. The Notice includes 86 questions & answers with examples addressing who is eligible for the credit, how to claim and receive funds made available by the credit, how to calculate the amount owed, the role of insurers in payment, the interaction with prior COVID-19 emergency relief notices including the extended COBRA election period, and interaction with various Health Reimbursement Arrangements.

IRS notes that there are additional issues related to COBRA premium assistance not addressed in the Notice that will be addressed in future guidance.

Please click link to find Notice 2021-31.