In 11 questions and answers, the IRS on Monday gave additional guidance to employers, health insurers, and plan administrators on how to provide laid-off employees temporary assistance paying for COBRA continuation coverage and claim a corresponding tax credit (Notice 2021-46).
In May, the Service issued Notice 2021-31, containing a set of 86 questions and answers concerning premium assistance for COBRA health care coverage. Monday’s notice supplements those 86 Q&As with 11 more.
The premium assistance and credit are available under the American Rescue Plan Act (ARPA), P.L. 117-2, enacted in March, which provided for a temporary 100% reduction in the premium that individuals have to pay when they elect COBRA continuation health care coverage following a reduction in hours or an involuntary termination of employment. Notably, ARPA also temporarily extended the COBRA election period. Under ARPA, the employer, insurer, or multiemployer plan to which the COBRA continuation premiums are payable then claims a refundable tax credit against its share of Medicare taxes.
The premium assistance is available for periods of COBRA coverage beginning after April 1, 2021, but not for periods beginning after Sept. 30, 2021.
The 11 questions and answers in Monday’s notice pertain to the following aspects of the premium assistance and credit:
- Eligibility for COBRA premium assistance for extended coverage periods;
- What happens at the end of the COBRA premium assistance period for individuals who elected dental and vision coverage;
- Whether state continuation coverage programs provide comparable coverage when they cover a subset of state residents; and
- Additional clarification on the entity that may claim the COBRA premium assistance credit.
For more information about the temporary premium assistance and credit, see a May 19 news story.
— Dave Strausfeld, J.D., (David.Strausfeld@aicpa-cima.com) is a Tax Adviser senior editor.