The American Rescue Plan Act: What You Need To Know

2020 ushered in a world wind of challenges for today’s business owners, 2021
continues to do the same. On March 11, 2021, President Biden signed the
American Recovery Plan Act (ARPA) which includes several provisions designed to
assist employees impacted by the COVID-19 pandemic. A key provision of the act
includes a COBRA premium subsidy which pays 100% of COBRA premiums for
eligible individuals who were involuntarily separated or had a reduction in hours
which resulted in their loss of health care benefits. The COBRA premium subsidy
runs from April 1, 2021 through September 30, 2021. COBRA is designed to
provide impacted employees with an opportunity to maintain health coverage
following the impact of a qualifying event.

Traditionally, impacted employees picked up the full cost of the COBRA premium
which represents the full monthly cost of benefits (both the employer and
employee contribution) during their employment and a 2% administration
processing fee. With the rising cost of health care insurance, COBRA premiums
were often cost prohibitive for employees to assume. This resulted in many
impacted employees forgoing healthcare coverage. The ARPA is designed to
address this issue, ensure that worker’s who desire coverage can receive it and to
provide much-needed relief to the cost of COBRA premiums.

While ARPA is an excellent benefit to impacted employees, it passes on many
challenges and administrative tasks to businesses. To comply with this new
legislation, businesses are required to:

• Identify all current and former worker’s that are eligible to receive the
COBRA subsidy.

• Revise COBRA notices and/ or supplement existing COBRA notices to
comply with the new notice requirements. Note: Department of Labor
model notices can be found at
www.dol.gov/agencies/ebsa/laws-and-regulations/laws/cobra/premium-subsidy

• Contact previously terminated employees not currently enrolled in COBRA
but who are eligible for the premium subsidy.

• Allow eligible employees who did not sign up for COBRA originally but are
in the time that they would have been eligible for COBRA had they enrolled.
Note: This will include most employees since COBRA eligibility traditionally
runs from 18 to 36 months from the time of original eligibility.

• Refund COBRA premiums of subsidy eligible employees who previously paid
COBRA premiums during the April 1, 2021 to September 30, 2021 period.

There are several notice requirements included in the American Recovery
Protection Act which businesses must satisfy in order to be in compliance
including providing written notifications of:

• The availability of the COBRA premium subsidy and the option to enroll in
an alternative plan coverage option.

• Ensuring notification of employees who became entitled to elect COBRA
before April 1, 2021 and individuals who did not have a COBRA election in
effect on April 1, 2021 (but who would have been eligible if they had
elected COBRA, or who previously elected COBRA and discontinued
coverage before April 1, 2021).

• Providing notices within 60 days of April 1, 2021 and must include the same
information as individuals who become entitled to elect COBRA between
April 1, 2021 and Sept. 30, 2021.

• Sending notices, no more than 45 days, and no less than 15 days, prior to
the premium subsidy expiration date.

In addition to the administrative challenges, there are financial challenges to
consider most notably the cost of covering COBRA premiums. Fortunately, most
employers will be reimbursed for the premium subsidy by a new tax credit that
applies against the employer’s share of the Medicare hospital insurance tax. The
credit is a dollar-for-dollar reimbursement of the COBRA premiums for eligible
employees that were waived pursuant to the ARPA subsidy. To the extent that the
credit amount exceeds the employer’s Medicare hospital insurance payroll tax, the
excess amount may be claimed. It is important to note that employers requesting
the credit may not also claim a credit on the same amount that is considered
as qualified wages under the CARES Act or as a qualified health expense under
the Families First Coronavirus Response Act or paid family leave acts under
Sections 3131 and 3132 of the Internal Revenue Code.

As a business owner, you are in a constant state of balancing business and
employee needs. Often, you find yourself having to make strategic decision which
impacts one of these groups. Good news, there are some important cost saving
options to consider which may help you to meet both needs. For example,
consider making some employees eligible for the Affordable Care Act subsidies,
employees may be able to receive reduced health insurance premiums and the
organization avoids the cost of the employer share of health care premiums.

Another option to consider is utilizing the Qualified small employer health
reimbursement arrangement (QSEHRA). QSEHRA allows small employers to use
pretax dollars to reimburse employees who buy nongroup health coverage.

Bottom line, as business owners, you face significant challenges trying to sustain
and grow your business. The factors impacting your business are increasing at an
expedited rate. This is why, it is important to select strategic partners that
understand your business and is adept with the ever-changing HR/ compliance
requirements that impact your organization. Lundy HR Consulting’s clients enjoy
the competitive advantage of big business benefits by knowing that their
organization is leveraging best practices and is in compliance with the latest
standards. We free you up so that you have more time to work on your core
business which after all is why you went into business. Contact Lundy HR
Consulting at www.LundyHRC.com for complimentary consultation on how we
can help your business succeed.

Kimberly Lundy, SHRM- SCP & DDI
CEO
Lundy HR Consulting