July 7, 2021 - Douglas Myser

Cobra premium assistance credit. In our ongoing coverage of all the changes to the tax codes, not just the past ones with former President Trump, but the new ones with President Biden, we are going to take a look at another aspect of the American Rescue Plan, the COBRA health care continuation benefit credit and what impact the American Rescue Plan has on it. The IRS issued Notice 2021-31 which gave employers, health care plans, and insurers background and clarifications on how to provide premium assistance for COBRA health care continuation benefits to affected employees and other beneficiaries and claim a corresponding tax credit. Cobra premium assistance credit.

The temporary premium assistance and credit are available under the American Rescue Plan Act, P.L. 117-2, which provides for a temporary 100% reduction in COBRA premiums for individuals and their families who elect COBRA continuation coverage due to a loss in group health coverage as a result of a reduction in work hours or involuntary termination of their employment. These ARPA also provides an extended COBRA election. 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. These credits can be used in Tax Resolution cases.

The premium assistance is available only for periods of COBRA coverage beginning after April 1, 2021, but not for periods beginning after Sept. 30. 2021. It does not extend to individuals eligible for coverage under another group plan or Medicare. An individual becomes an "assistance eligible individual" by an involuntary termination or reduction in hours of a covered employee's employment during the period April 1, 2021, to Sept. 30, 2021, who is eligible for and elects COBRA continuation coverage. Qualified beneficiaries include the spouse and dependent children of the covered employee who are also covered under the group health plan. The premium assistance and credit also generally apply to comparable coverage, known as "mimi-COBRA," which are also addressed in the IRS memo.