n-21-31.pdf

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Premium Assistance for COBRA Benefits

Notice 2021-31

This notice provides guidance on the application of § 9501 of the American
Rescue Plan Act of 2021 (the ARP), Pub. L. 117-2, 135 Stat. 4 (March 11, 2021),
relating to temporary premium assistance for Consolidated Omnibus Budget
Reconciliation Act of 1985 (COBRA) continuation coverage.
1

BACKGROUND

Section 9501 of the ARP – COBRA Premium Assistance

Section 9501 of the ARP provides for a temporary 100 percent reduction in the
premium otherwise payable by certain individuals and their families who elect COBRA
continuation coverage through the Internal Revenue Code (Code), the Employee
Retirement Income Security Act of 1974 (ERISA), or the Public Health Service Act (PHS
Act) due to a loss of coverage as the result of a reduction in hours or an involuntary
termination of employment.
2
The temporary premium assistance is also available to
individuals enrolled in continuation health coverage under State programs that provide
for coverage comparable to COBRA continuation coverage, often referred to as “mini-
COBRA.” In this notice, continuation of health coverage under all of these provisions is
referred to as “COBRA continuation coverage,” unless otherwise specified. Also, in this
notice, the temporary premium assistance available under the ARP is referred to as
“COBRA premium assistance” or “premium assistance,” unless otherwise specified.

Under § 9501(a)(3) of the ARP, an “Assistance Eligible Individual” is an individual
(1) who is a qualified beneficiary with respect to a period of COBRA continuation
coverage during the period from April 1, 2021, through September 30, 2021, and eligible
for that COBRA continuation coverage by reason of a qualifying event specified in
§ 603(2) of ERISA, § 4980B(f)(3)(B) of the Code, or § 2203(2) of PHS Act, except for
voluntary termination of employment, and (2) who elects COBRA continuation
coverage. The ARP requires that health insurance issuers and group health plans treat
Assistance Eligible Individuals as having paid the full amount of their COBRA premium
for the specified coverage. The person to whom premiums for COBRA continuation
coverage are payable (the employer, insurer, or multiemployer plan, as applicable) is
entitled to a refundable tax credit against its share of Medicare taxes under newly added

1
Employer-sponsored health plans generally are required to offer an employee, spouse, or dependent
child covered by the plan the opportunity to continue coverage under the plan for a specified period of
time after the occurrence of certain events that otherwise would have terminated the coverage (qualifying
events). These continuation of coverage requirements, and corresponding coverage (if elected), are often
referred to as “COBRA continuation coverage” or “COBRA” requirements. The COBRA requirements
were enacted originally as part of the Consolidated Omnibus Budget Reconciliation Act of 1985, Pub. L.
99-272 (April 7, 1986), and are set forth in § 4980B of the Internal Revenue Code.
2
COBRA continuation coverage under the Code, ERISA, and the PHS Act is also referred to in this notice
as “Federal COBRA.”

§ 6432 of the Code.
3

COBRA premium assistance is available as of the first period of coverage
beginning on or after April 1, 2021, and will not be available for periods of coverage
beginning after September 30, 2021. For each Assistance Eligible Individual, COBRA
premium assistance does not extend beyond the period of COBRA continuation
coverage in the event that the period ends prior to September 30, 2021. However,
premium assistance is not available if an individual is eligible for coverage under any
other group health plan
4
or for Medicare. If an individual receiving premium assistance
becomes eligible for coverage under any other group health plan or for Medicare, the
premium assistance period ends. An individual receiving premium assistance who
becomes eligible for coverage under any other group health plan or Medicare is
required to notify the group health plan providing COBRA continuation coverage of
eligibility for that other coverage. If the individual fails to notify the group health plan, the
individual may be subject to a penalty of $250 for each failure. If the individual
fraudulently fails to notify the group health plan, the individual is subject to a penalty
equal to the greater of $250 or 110 percent of the premium assistance improperly
received after the end of eligibility for COBRA premium assistance.

Under § 9501(a)(1)(B) of the ARP, an employer may allow an Assistance Eligible
Individual to elect coverage different from the coverage under the plan in which the
individual was enrolled before the reduction in hours or involuntary termination of
employment, and COBRA premium assistance will apply with respect to that newly
elected coverage.
5
The premium for the different coverage option that is offered may
not exceed the premium for the coverage the individual had before the reduction in
hours or involuntary termination of employment. In addition, the other coverage offered
under this option must be coverage offered to similarly situated active employees and
may not be coverage that provides only excepted benefits (as defined in § 9832(c) of
the Code, § 733(c) of ERISA, and § 2971(c) of PHS Act), a health FSA (as defined by
§ 106(c)(2) of the Code), or a QSEHRA (as defined in § 9831(d)(2) of the Code). If
offered the option to enroll in different coverage, the Assistance Eligible Individual has

3
Section 6432 was first added to the Code by the American Recovery and Reinvestment Act of 2009,
Pub. L. 111-5 (Feb. 17, 2009). It was later stricken by the Tax Technical Corrections Act of 2018, Pub. L.
115-141 (March 23, 2018). The ARP restores § 6432 to the Code with certain modifications.
4
Eligibility for coverage under any other group health plan does not terminate eligibility for COBRA
premium assistance if the other group health plan provides only excepted benefits (as defined in
§ 9832(c) of the Code, § 733(c) of ERISA, and § 2971(c) of the PHS Act), is a health flexible spending
arrangement (FSA) (as defined by § 106(c)(2) of the Code), or is a qualified small employer health
reimbursement arrangement (as defined in § 9831(d)(2) of the Code) (QSEHRA). Whenever reference is
made in this notice to the end of eligibility for COBRA premium assistance due to eligibility for coverage
under any other group health plan, coverage under these plans or arrangements is not taken into
account. Additionally, eligibility for other group health plan coverage (that is not an excepted benefit, a
health FSA, or a QSEHRA) makes an individual ineligible for COBRA premium assistance even if the
offer of other coverage does not provide minimum value or is not affordable for purposes of the premium
tax credit under § 36B.
5
Note that this provision does not modify the general requirement under Federal COBRA that a group
health plan must allow a qualified beneficiary to elect to continue the coverage in which the individual was
enrolled as of the qualifying event.

90 days after the date of the notice of the option to elect other coverage to elect the
other coverage.

Section 9501(a)(4) of the ARP provides an extended election period for certain
individuals who did not have an election of COBRA continuation coverage in effect on
April 1, 2021, referred to in this notice as the “ARP extended election period.” The ARP
extended election period is available for an individual who would be an Assistance
Eligible Individual if the individual had a COBRA continuation coverage election in effect
on April 1, 2021, or an individual who previously elected COBRA continuation coverage
and discontinued that coverage before April 1, 2021. The ARP extended election period
continues for 60 days after these individuals are provided notice of the extended
election period. The resulting COBRA continuation coverage does not extend beyond
the maximum period of COBRA continuation coverage that would have been required
under the applicable COBRA continuation coverage provision if the individual had
elected COBRA continuation coverage initially as required under that applicable
COBRA provision, or had not discontinued the elected COBRA continuation coverage.

The plan must treat an Assistance Eligible Individual as having paid the full
premium. If the plan does not treat the Assistance Eligible Individual as having paid the
full premium, the plan will have failed to meet the applicable continuation coverage
requirements. Thus, in the case of a plan subject to COBRA continuation coverage
requirements under § 4980B, the failure to treat the Assistance Eligible Individual as
having made the full payment is a failure to satisfy the requirements of § 4980B and
may result in the imposition of the excise tax under § 4980B(b).

Section 6432 of the Code – COBRA Premium Assistance Credit

The ARP adds § 6432 to the Code, which provides that the “person to whom
premiums are payable for continuation coverage” is allowed a “premium assistance
credit” for each calendar quarter against the tax imposed by § 3111(b), or against so
much of the taxes imposed under § 3221(a) as are attributable to the rate in effect
under § 3111(b), of an amount equal to the premiums not paid by Assistance Eligible
Individuals for COBRA continuation coverage by reason of § 9501(a)(1) of the ARP with
respect to that calendar quarter. If, for the calendar quarter for which the credit is
allowed, the amount of the credit allowed is in excess of the tax imposed by § 3111(b),
or so much of the taxes imposed under § 3221(a) as are attributable to the rate in effect
under § 3111(b), after reduction for any credits allowed under §§ 3131, 3132, and 3134,
the excess is treated as an overpayment that is refunded under §§ 6402(a) and
6413(b).

The “person to whom premiums are payable” is (1) the multiemployer plan, in the
case of a group health plan that is a multiemployer plan (as defined in § 3(37) of
ERISA); (2) the employer, in the case of a group health plan, other than a multiemployer
plan, that is (a) subject to Federal COBRA, or (b) under which some or all of the
coverage is not provided by insurance (that is, a plan that is self-funded, in whole or in
part); or (3) the insurer providing the coverage, in the case of any other group health

plan not described in (1) or (2) (generally, fully insured coverage subject to State
continuation coverage requirements, not Federal COBRA). In this notice, the “person to
whom premiums are payable” is sometimes referred to as the “premium payee.”

Section 6432(c)(2)(C) provides that any penalty under § 6656 for any failure to
make a deposit of the tax imposed by § 3111(b), or so much of the taxes imposed under
§ 3221(a) as are attributable to the rate in effect under § 3111(b), is waived if the
Secretary of the Treasury determines that the failure was due to anticipation of the
premium assistance credit. Also, Notice 2021-24, 2021-18 IRB 1122, provides that the
penalty under § 6656 does not apply for any failure to timely deposit employment taxes
(withheld income taxes, taxes under the Federal Insurance Contributions Act (FICA),
and taxes under the Railroad Retirement Tax Act (RRTA)) if (1) the employer is a
person to whom premiums are payable, (2) the amount of employment taxes that the
employer does not timely deposit (after reduction for other credits) is less than or equal
to the amount of the employer’s anticipated credits under § 6432(a) for the calendar
quarter as of the time of the required deposit, and (3) the employer did not seek
payment of an advance credit by filing Form 7200 with respect to the anticipated credits
it relied upon to reduce its deposits. Section 6432(f) extends the statute of limitations for
the assessment of any amount attributable to the credit to 5 years after the later of (1)
the date on which the original return which includes the calendar quarter with respect to
which the credit is determined is filed, or (2) the date on which that return is treated as
filed under § 6501(b)(2). Finally, § 6432(g) provides that the Secretary shall issue such
regulations, or other guidance, forms, instructions, and publications, as may be
necessary or appropriate to carry out § 6432, including “allowing the credit to third-party
payers (including professional employer organizations, certified professional employer
organizations, or agents under § 3504).”

Under § 6432(e), the gross income of any person allowed the premium
assistance credit is increased, for the taxable year which includes the last day of any
calendar quarter with respect to which the credit is allowed, by the amount of the credit.
In addition, no credit is allowed with respect to any amount which is taken into account
as qualified wages under § 2301 of the Coronavirus Aid, Relief, and Economic Security
Act (CARES Act), Pub. L. 116-136, 134 Stat. 281 (March 27, 2020), as amended by the
Taxpayer Certainty and Disaster Tax Relief Act of 2020 (Relief Act), which was enacted
as Division EE of the Consolidated Appropriations Act, 2021, Pub. L. 116-260, 134 Stat.
1182 (December 27, 2020), § 3134 of the Code, or as qualified health plan expenses
under §§ 7001(d) or 7003(d) of the Families First Coronavirus Response Act (FFCRA),
Pub. L. 116-127, 134 Stat. 178 (March 18, 2020), as amended by § 286 of the Relief
Act, or §§ 3131 or 3132 of the Code.

Finally, the amount of any COBRA premium assistance is excluded from an
individual’s gross income under new § 139I of the Code.

Emergency Relief Notices

In response to the COVID-19 National Emergency,
6
the Departments of Labor
and the Treasury (the Departments) issued the Extension of Certain Timeframes for
Employee Benefit Plans, Participants, and Beneficiaries Affected by the COVID-19
Outbreak (Joint Notice) (85 FR 26351, published May 4, 2020), which provides
extensions of certain timeframes for group health plans and their participants and
beneficiaries. The Joint Notice provides that plans must disregard certain periods
beginning March 1, 2020 until 60 days after the announced end of the National
Emergency or such other date announced by the Departments (Outbreak Period) in
determining the time by which certain actions must be taken or are permitted to be
completed.

Section 7508A(b) of the Code and § 518 of ERISA limit the Departments’
authority to disregard time periods to one year. As the one-year anniversary of the Joint
Notice approached, the Department of Labor, with the concurrence of the Treasury
Department, issued EBSA Disaster Relief Notice 2021-01 (February 26, 2021). EBSA
Disaster Relief Notice 2021-01 clarifies that disregarded periods under the Joint Notice
run until the earlier of (1) one year from the date the applicable person was first eligible
for relief, or (2) 60 days after the announced end of the National Emergency. The Joint
Notice and EBSA Disaster Relief Notice 2021-01 are referred to collectively in this
notice as the “Emergency Relief Notices.”

The periods and dates subject to the Emergency Relief Notices include, among
others: (1) the 60-day election period for COBRA continuation coverage under
§ 4980B(f)(5); (2) the date for making COBRA premium payments pursuant to
§ 4980B(f)(2)(B)(iii) and (C); and (3) the date for plans to provide a COBRA election
notice under § 4980B(f)(6)(D).

QUESTIONS AND ANSWERS

The following questions and answers address many issues that have arisen with
respect to COBRA premium assistance available for COBRA continuation coverage
under the ARP. Generally, the questions and answers apply for purposes of all COBRA
continuation coverage requirements under the ARP, that is, both Federal COBRA and
comparable State mini-COBRA requirements. If a question or answer or a particular
part of an answer is applicable only to Federal COBRA, that discussion refers
specifically to Federal COBRA. COBRA premium assistance requirements apply to the
employer or plan sponsor, group health plan, or issuer, depending on the facts and
circumstances. For simplicity, in this notice, references in the questions and answers to
an “employer” are considered references to the employer, plan, plan sponsor, group
health plan, or issuer, as applicable to a particular situation, whereas references to

6
On March 13, 2020, the President issued the Proclamation on Declaring a National Emergency
Concerning the Novel Coronavirus Disease (COVID-19) Outbreak declaring a national emergency,
beginning March 1, 2020, under
§§ 201 and 301 of the National Emergencies Act (50 U.S.C. 1601 et
seq.). By separate letter, also on March 13, 2020, the President declared under § 501(b) of the Robert T.
Stafford Disaster Relief and Emergency Assistance Act, 42 U.S.C. § 5121 et seq., that an emergency
existed nationwide, as the result of the COVID-19 outbreak (the COVID-19 National Emergency or
National Emergency). See 85 FR 26351, 26352 (May 4, 2020).

“common law employer” are references to the entity that is the employer under the
common law of the Assistance Eligible Individual receiving the COBRA premium
assistance.

ELIGIBILITY FOR COBRA PREMIUM ASSISTANCE

Q-1. Who qualifies as an Assistance Eligible Individual?

A-1. An Assistance Eligible Individual is any individual who is (1) a qualified
beneficiary as the result of (A) the reduction of hours of a covered employee’s
employment or (B) the involuntary termination of a covered employee’s employment
(other than by reason of an employee’s gross misconduct), (2) is eligible for COBRA
continuation coverage for some or all of the period beginning on April 1, 2021, through
September 30, 2021, and (3) elects the COBRA continuation coverage. This includes
qualified beneficiaries who are the spouse or dependent child of the employee who had
the reduction in hours or involuntary termination of employment resulting in a loss of
coverage, as well as the employee, if that reduction in hours or involuntary termination
of employment caused the qualified beneficiary to lose coverage and the other
requirements are satisfied.

Q-2. Who qualifies as a qualified beneficiary for purposes of becoming an
Assistance Eligible Individual?

A-2. In order to be a qualified beneficiary who is eligible to become an
Assistance Eligible Individual, an individual must (1) be covered under the group health
plan on the day before the reduction in hours or involuntary termination of the covered
employee’s employment, and (2) lose eligibility for the coverage due to the reduction in
hours or involuntary termination of the covered employee’s employment.
7
An individual
who loses group health coverage in connection with the termination of a covered
employee’s employment by reason of the employee’s gross misconduct is not a
qualified beneficiary and, thus, cannot be an Assistance Eligible Individual.

Q-3. Can an individual become an Assistance Eligible Individual more than
once?

A-3. Yes. An individual who becomes a qualified beneficiary as the result of a
reduction in hours or involuntary termination of employment, and who otherwise meets
the requirements to be an Assistance Eligible Individual, is treated as an Assistance
Eligible Individual regardless of whether the individual was also treated as an
Assistance Eligible Individual at an earlier date.

Example: On April 1, 2021, the individual’s employment is terminated, and the
individual becomes a qualified beneficiary. The individual elects COBRA continuation

7
There are exceptions to this rule in the case of a child born to or adopted by a covered employee during
a period of COBRA continuation coverage or in certain circumstances where coverage was wrongfully
denied to the individual (see § 54.4980B-3, Q&A-1).

coverage and becomes an Assistance Eligible Individual with COBRA continuation
coverage beginning on April 1, the date the individual lost coverage. On July 1, 2021,
the individual becomes eligible for coverage under a group health plan sponsored by
the employer of the individual’s spouse and ceases to be an Assistance Eligible
Individual. The individual ceases COBRA continuation coverage as of July 1, 2021, and
enrolls in coverage in the group health plan sponsored by the employer of the
individual’s spouse. On August 1, 2021, the individual’s spouse has an involuntary
termination of employment and as a result the individual and spouse lose coverage. The
individual and spouse become qualified beneficiaries due to the loss of coverage and
elect COBRA continuation coverage with the plan sponsored by the spouse’s employer.
The individual and spouse become Assistance Eligible Individuals with respect to
COBRA continuation coverage as of August 1, 2021.

Q-4. May the employer require individuals to self-certify or attest that they are
eligible for COBRA continuation coverage with COBRA premium assistance due to a
reduction in hours or involuntary termination of employment and, if so, may the self-
certification or attestation be used to assist the employer in substantiating its entitlement
to the premium assistance credit?

A-4. Yes. Employers may require individuals to provide a self-certification or
attestation regarding their eligibility status with respect to a reduction in hours or
involuntary termination of employment, which may assist the employer in substantiating
its entitlement to the credit. Employers are not required to obtain a self-certification or
attestation; however, employers who claim the credit must retain in their records either a
self-certification or attestation from the individual regarding the individual’s eligibility
status, or other documentation to substantiate that the individual was eligible for the
COBRA premium assistance (see Q&A-7; see also Q&A-84).

Q-5. May the employer require individuals to self-certify or attest as to their
eligibility status regarding other disqualifying group health plan coverage or Medicare,
and if so, may the self-certification or attestation be used to assist the employer in
substantiating its entitlement to the premium assistance credit?

A-5. Yes. Employers may require individuals to provide a self-certification or
attestation as to their eligibility status for other disqualifying group health plan coverage
or Medicare, which may assist the employer in substantiating its entitlement to the
premium assistance credit. Employers are not required to obtain a self-certification or
attestation; however, employers who claim the credit must retain in their records either a
self-certification or attestation from the individual regarding the individual’s eligibility
status, or other documentation to substantiate that the individual was eligible for the
COBRA premium assistance (see Q&A-7; see also Q&A-84).

Q-6. May an employer rely on an individual’s attestation regarding a reduction
in hours or involuntary termination of employment, or regarding eligibility for other
disqualifying coverage, for the purpose of substantiating eligibility for the premium
assistance credit?

A-6. Yes. An employer may rely on an individual’s attestation regarding a
reduction in hours or involuntary termination of employment, and eligibility for other
disqualifying coverage, for the purpose of substantiating eligibility for the credit, unless
the employer has actual knowledge that the individual’s attestation is incorrect.

Q-7. Must an employer keep a record of an individual’s attestation?

A-7. Yes. If the employer is relying on an individual’s attestation regarding a
reduction in hours or involuntary termination of employment, or regarding eligibility for
other disqualifying coverage, the employer must keep a record of the attestation in order
to substantiate eligibility for the premium assistance credit. An employer may rely on
other evidence to substantiate eligibility, such as records concerning a reduction in
hours or involuntary termination of employment.

Q-8. Does a qualifying event other than a reduction in hours or an involuntary
termination of employment qualify an individual for COBRA premium assistance?

A-8. No. Qualifying events other than a reduction in hours or an involuntary
termination of employment, such as divorce or a covered dependent child ceasing to be
a dependent child under the generally applicable terms of the plan (such as loss of
dependent status due to aging out of eligibility), are not events qualifying an individual
for COBRA premium assistance.

Q-9. If a potential Assistance Eligible Individual was eligible for other group
health plan coverage before April 1, 2021, but on and after April 1, 2021, has not been
permitted to enroll in that other group health plan coverage, is COBRA premium
assistance available for the individual’s COBRA continuation coverage?

A-9. Yes. COBRA premium assistance is available to a potential Assistance
Eligible Individual until the individual is permitted to enroll in coverage under any other
group health plan (including during a waiting period for any other plan).

Example 1: An individual’s employment was involuntarily terminated and as a
result the individual lost health coverage on October 1, 2020. On November 1, 2020, the
individual was eligible to enroll in the group health plan provided by the employer of the
individual’s spouse as part of that group health plan’s annual open enrollment period,
but the individual did not enroll. The open enrollment period for the spouse’s group
health plan ended December 1, 2020, and the individual has not been permitted to
enroll in coverage under the spouse’s group health plan at any time on or after April 1,
2021. Under these facts, the individual is not considered eligible for coverage under the
plan of the spouse’s employer until the first available enrollment period, if any, that
begins on or after April 1, 2021. Therefore, the individual may elect COBRA
continuation coverage under the plan of the individual’s former employer during the
ARP extended election period and may receive COBRA premium assistance as an
Assistance Eligible Individual under the plan of the individual’s former employer,

beginning on or after April 1, 2021.

Example 2: Same facts as Example 1, except that the spouse’s group health plan
has an open enrollment period from June 1, 2021, to June 14, 2021, with coverage
elected during the open enrollment period beginning July 1, 2021. The spouse does not
elect coverage for the individual under the plan of the spouse’s employer, and the
individual continues COBRA continuation coverage under the plan of the individual’s
former employer. Under these facts, COBRA premium assistance is not available for the
individual’s COBRA continuation coverage under the plan of the individual’s former
employer for periods of coverage beginning on or after July 1, 2021 (the date on which
the individual was first eligible to enroll in the group health plan of the spouse’s
employer).

Example 3: An individual’s employment was involuntarily terminated and as a
result the individual lost health coverage on October 1, 2020. The individual received a
COBRA notice on October 1, 2020. The individual qualified for a special enrollment
period for loss of coverage under the group health plan of the spouse’s employer. Under
the Emergency Relief Notices, the individual remains eligible to elect COBRA
continuation coverage or enroll in the spouse’s plan. Additionally, on November 1, 2020,
the individual was eligible to enroll in the spouse’s plan under that plan’s annual open
enrollment period. The open enrollment period for the spouse’s plan ended December
1, 2020. However, the individual remains eligible to enroll in coverage under the
spouse’s plan under the loss of coverage special enrollment period due to the
Emergency Relief Notices. Under these facts, the individual is considered eligible for
coverage under the plan of the spouse’s employer due to the special enrollment period
for loss of coverage as extended by the Emergency Relief Notices. Therefore, while the
individual could elect COBRA continuation coverage from the former employer’s plan,
the individual may not receive COBRA premium assistance as an Assistance Eligible
Individual under the plan of the individual’s former employer.

Q-10. If a potential Assistance Eligible Individual does not elect COBRA
continuation coverage and enrolls in coverage under another group health plan, but has
ceased to be covered by the other group health plan as of April 1, 2021, is COBRA
premium assistance available if the individual elects COBRA continuation coverage
under the ARP extended election period?

A-10. Yes. Enrollment in other group health plan coverage before electing
COBRA continuation coverage does not end the period of eligibility for COBRA
continuation coverage. If the individual is no longer covered by (or eligible to enroll in)
the other group health plan coverage as of April 1, 2021, that prior coverage by a group
health plan does not disqualify the individual from COBRA premium assistance.
However, beginning on April 1, 2021, coverage by (or eligibility to enroll in) another
group health plan would disqualify the individual from COBRA premium assistance,
even though it does not end the period of eligibility for COBRA continuation coverage.

Q-11. If an Assistance Eligible Individual is eligible for other disqualifying group

health plan coverage or Medicare beginning on or after April 1, 2021, but does not enroll
in either, is COBRA premium assistance available for the individual’s COBRA
continuation coverage for periods of coverage beginning on or after the date the
individual is first eligible for the other coverage?

A-11. No. (However, if the other coverage for which the individual is eligible is
COBRA continuation coverage, that coverage will not cause the individual to be
ineligible for the COBRA premium assistance.)

Example 1: An Assistance Eligible Individual enrolled in COBRA continuation
coverage begins employment with a new employer and is eligible to enroll in the
employer’s group health plan, with coverage effective the first day of the next month.
The Assistance Eligible Individual declines the coverage and continues COBRA
continuation coverage. Although eligibility for other group health coverage does not end
the individual’s eligibility for Federal COBRA continuation coverage, eligibility for
COBRA premium assistance ends as of the first day of the next month.

Example 2: Same facts as Example 1, except that the new employer’s group
health plan imposes a 2-month waiting period, with coverage starting as of the first day
of the month immediately following the end of the waiting period. The individual’s
eligibility for COBRA premium assistance ends as of the first day of the month
immediately following the end of the waiting period, even though the individual declined
coverage under the new employer’s group health plan. The result is the same if the
individual enrolls in the new employer’s group health plan; the individual is not eligible
for COBRA premium assistance as of the first day of the month immediately following
the end of the waiting period.

Example 3: Two Assistance Eligible Individuals who are spouses are enrolled in
COBRA continuation coverage. One spouse begins employment with a new employer
and is eligible to enroll in the employer’s group health plan with self-only or family
coverage, with coverage effective the first day of the next month. That spouse enrolls in
self-only coverage, and the other spouse continues COBRA continuation coverage.
Although the individual is allowed to continue Federal COBRA continuation coverage,
the individual is no longer eligible for COBRA premium assistance as of the first day of
the next month because the individual is eligible for coverage under the group health
plan of the spouse’s employer.

Q-12. Is an individual currently enrolled in Medicare who is a qualified
beneficiary as the result of a reduction in hours or involuntary termination of
employment able to elect COBRA continuation coverage and receive COBRA premium
assistance?

A-12. No. An individual currently enrolled in Medicare who becomes a qualified
beneficiary as the result of a reduction in hours or involuntary termination of
employment may be eligible to elect COBRA continuation coverage but is not eligible for
COBRA premium assistance.

Q-13. Is an individual who is a qualified beneficiary as the result of a reduction in
hours or involuntary termination of employment but who is currently enrolled in
individual health insurance coverage through a Health Insurance Exchange eligible to
elect COBRA continuation coverage and receive COBRA premium assistance?

A-13. Yes. An individual who is a qualified beneficiary as the result of a
reduction in hours or involuntary termination of employment but who is currently
enrolled in individual health insurance coverage through a Health Insurance Exchange
may be eligible to elect COBRA continuation coverage and for COBRA premium
assistance. However, an individual is not eligible for a premium tax credit to help pay for
the cost of Exchange coverage during any month that the individual is enrolled in
COBRA continuation coverage. An individual who elects COBRA continuation coverage
(with or without COBRA premium assistance) and who is enrolled in coverage through a
Health Insurance Exchange with advance payments of the premium tax credit (APTC)
may be required to repay the APTC for the overlap months. See Q&A-44 for information
regarding the waiver of COBRA continuation coverage, which may assist individuals in
this situation.

Q-14. Does a reduction in hours or involuntary termination of employment that
follows an earlier qualifying event, such as a divorce, make the qualified beneficiary
from the first qualifying event a potential Assistance Eligible Individual?

A-14. No. If COBRA continuation coverage is based on a qualifying event other
than a reduction in hours or involuntary termination of employment, the later reduction in
hours or involuntary termination of employment of the employee does not cause a loss
of coverage, and the qualified beneficiary therefore does not become a potential
Assistance Eligible Individual.

Example: An employee is divorced and the divorce results in a loss of health
coverage for the spouse of the employee (but not the employee) on November 1, 2020.
The spouse is eligible for and timely elects COBRA continuation coverage. On
December 1, 2020, the employee’s employment is involuntarily terminated and, as a
result, the employee loses health coverage. The employee elects COBRA continuation
coverage that begins December 1, 2020. The spouse is not an Assistance Eligible
Individual because the qualifying event with respect to the spouse’s COBRA
continuation coverage is the divorce, rather than the employee’s involuntary termination
of employment. Moreover, the employee’s involuntary termination of employment is not
a qualifying event for the spouse. The employee is an Assistance Eligible Individual,
however, because the qualifying event with respect to the employee is the involuntary
termination of employment.

Q-15. If, as the result of an involuntary termination of employment, an individual
loses coverage under a health plan that is not subject to COBRA continuation coverage
requirements (as defined under the ARP) and the individual is then offered and elects
continuation coverage provided voluntarily by the employer, is COBRA premium

assistance available with respect to that continuation coverage?

A-15. No. In order for COBRA premium assistance and the related premium
assistance credit to be available, the plan must be subject to COBRA continuation
coverage requirements as defined under the ARP. Examples of health plans that may
not be subject to either Federal COBRA or State mini-COBRA include a self-insured
church plan or a small employer plan. (Treas. Reg. § 54.4980B-2, Q&A-5 provides that
a small-employer plan excluded from Federal COBRA is a group health plan maintained
by an employer that normally employed fewer than 20 employees during the preceding
calendar year.)

Q-16. Is COBRA premium assistance available with respect to temporary
continuation coverage elected under the Federal Employees Health Benefits (FEHB)
program pursuant to 5 U.S. Code § 8905a by an individual who lost coverage due to a
reduction in hours or an involuntary termination of employment?

A-16. No. Continuation coverage elected under the FEHB program pursuant to
5 U.S. Code § 8905a is not COBRA continuation coverage for purposes of § 9501 of the
ARP and so COBRA premium assistance is not available with respect to that coverage.

Q-17. Is COBRA premium assistance available to individuals who have elected
and remained on COBRA continuation coverage for an extended period due to a
disability determination, second qualifying event, or an extension under State mini-
COBRA, to the extent those additional periods of coverage fall between April 1, 2021,
and September 30, 2021, if the original qualifying event was a reduction in hours or an
involuntary termination of employment?

A-17. Yes. If the original qualifying event was a reduction in hours or an
involuntary termination of employment, COBRA premium assistance is available to
individuals who have elected and remained on COBRA continuation coverage for an
extended period due to a disability determination, second qualifying event, or an
extension under State mini-COBRA, to the extent the additional periods of coverage fall
between April 1, 2021, and September 30, 2021.

Q-18. If retiree health coverage (that is not COBRA continuation coverage) is
offered to a potential Assistance Eligible Individual, how does that offer affect eligibility
for COBRA premium assistance?

A-18. The effect on eligibility for COBRA premium assistance depends on
whether the retiree health coverage is offered under the same group health plan as the
COBRA continuation coverage or under a separate group health plan. If offered under
the same group health plan, the offer of the retiree health coverage has no effect on a
potential Assistance Eligible Individual’s eligibility for COBRA premium assistance under
the ARP. However, a potential Assistance Eligible Individual is not eligible for COBRA
premium assistance if the individual is offered retiree health coverage that is not
COBRA continuation coverage and is coverage under a separate group health plan

than the plan under which the COBRA continuation coverage is offered.

The COBRA regulations provide rules for determining whether health benefits
provided by an employer or employee organization constitute one or more group health
plans for purposes of Federal COBRA. See Treas. Reg. § 54.4980B-2, Q&A-6. Under
those rules, all health benefits provided by an organization constitute a single group
health plan unless it is clear from the instruments governing the arrangement or
arrangements that the benefits are being provided under separate plans, and the
arrangement or arrangements are operated pursuant to such instruments as separate
plans. (See Q&A-36 for more information regarding retiree health coverage.)

Q-19. Does COBRA premium assistance apply to portions of the premium
attributable to COBRA continuation coverage for individuals who are not qualified
beneficiaries?

A-19. No. COBRA premium assistance is limited to premiums attributable to
COBRA continuation coverage for Assistance Eligible Individuals. For purposes of
Federal COBRA, a qualified beneficiary with respect to a covered employee under a
group health plan is the spouse of the employee or a dependent child of the employee if
the spouse or dependent child was a beneficiary under the plan on the day before the
qualifying event. A child who is born to or adopted by the covered employee during the
period of COBRA continuation coverage may also be a qualified beneficiary. Otherwise,
a spouse or dependent child who was not a beneficiary under the plan before the
qualifying event is not a qualified beneficiary. In addition, if an individual does not meet
the definition of a qualified beneficiary under Federal COBRA, the individual’s coverage
is not eligible for COBRA premium assistance, even though the individual may continue
to be covered or be eligible to continue coverage under a plan by its terms, or as
required by State law. (If there are additional individuals enrolled in COBRA continuation
coverage who are ineligible for COBRA premium assistance, see Q&A-68 for
information regarding calculation of the premium assistance credit.)

Q-20. If an individual makes or owes COBRA premium payments for retroactive
COBRA continuation coverage elected under the Emergency Relief Notices for which
the payment due date has been extended, does that make the individual ineligible for
premium assistance?

A-20. No. If an individual elected retroactive COBRA continuation coverage
under the Emergency Relief Notices, neither making nor owing COBRA premium
payments for retroactive COBRA continuation coverage for which the payment due date
has been extended makes an individual ineligible for COBRA premium assistance.
However, an individual may lose retroactive COBRA continuation coverage (as noted in
Q&A-58) for the months for which the premium is not timely paid under the Emergency
Relief Notices. Any late or unpaid premiums for retroactive COBRA continuation
coverage will not affect an individual’s eligibility for COBRA premium assistance.

REDUCTION IN HOURS

Q&A-21 through Q&A-23 apply solely for purposes of determining whether there
is a reduction in hours under § 9501 of the ARP and § 6432 of the Code, and other
provisions of the Code added or amended by § 9501 of the ARP, but not for any other
purposes of the Code or any other law.

Q-21. May a qualified beneficiary whose qualifying event is a voluntary reduction
in hours be a potential Assistance Eligible Individual who qualifies for COBRA premium
assistance?

A-21. Yes. An employee’s reduction in hours would cause the qualified
beneficiary to be a potential Assistance Eligible Individual regardless of whether the
reduction in hours is voluntary or involuntary.

Q-22. Is a qualified beneficiary whose qualifying event is a furlough a potential
Assistance Eligible Individual who qualifies for COBRA premium assistance?

A-22. Yes. In this notice, the term “furlough” means a temporary loss of
employment or complete reduction in hours with a reasonable expectation of return to
employment or resumption of hours (for example, due to an expected business recovery
of the employer) such that the employer and employee intend to maintain the
employment relationship. A furlough may be a reduction in hours regardless of whether
the employer initiated the furlough, or the individual participated in a furlough process
analogous to a window program (see Q&A-29).

Q-23. Does a reduction in hours include a work stoppage as the result of a lawful
strike initiated by employees or their representatives or a lockout initiated by the
employer?

A-23. Yes. A reduction in hours includes a work stoppage, either as the result of
a lawful strike initiated by employees or their representatives or a lockout initiated by the
employer, as long as at the time the work stoppage or the lawful strike commences the
employer and employee intend to maintain the employment relationship.

INVOLUNTARY TERMINATION OF EMPLOYMENT

Q&A-24 through Q&A-34 apply solely for purposes of determining whether there
is an involuntary termination of employment under § 9501 of the ARP and § 6432 of the
Code, and other provisions of the Code added or amended by § 9501 of the ARP, but
not for any other purposes under the Code or any other law.

Q-24. What circumstances constitute an involuntary termination of employment
for purposes of the definition of an Assistance Eligible Individual?

A-24. An involuntary termination of employment means a severance from
employment due to the independent exercise of the unilateral authority of the employer

to terminate the employment, other than due to the employee’s implicit or explicit
request, where the employee was willing and able to continue performing services. For
application of the involuntary termination of employment standard with respect to the
failure to renew an employment agreement or similar contract, see Q&A-34. In addition,
an employee-initiated termination of employment constitutes an involuntary termination
of employment for purposes of COBRA premium assistance if the termination of
employment constitutes a termination for good reason due to employer action that
results in a material negative change in the employment relationship for the employee
analogous to a constructive discharge.

The determination of whether a termination is involuntary is based on the facts
and circumstances. For example, if a termination is designated as voluntary or as a
resignation, but the facts and circumstances indicate that the employee was willing and
able to continue performing services, so that, absent the voluntary termination, the
employer would have terminated the employee’s services, and that the employee had
knowledge that the employee would be terminated, the termination is involuntary.

Q-25. Does involuntary termination of employment include an employer’s action
to end an individual’s employment while the individual is absent from work due to illness
or disability, if that action would otherwise constitute an involuntary termination of
employment?

A-25. Yes. Involuntary termination of employment occurs when the employer
takes action to terminate the individual’s employment, if before the action there is a
reasonable expectation that the employee will return to work after the illness or disability
has subsided. However, mere absence from work due to illness or disability before the
employer has taken action to end the individual’s employment is not an involuntary
termination of employment (see Q&A-32). Whether the absence from work is a
reduction in hours potentially resulting in COBRA continuation coverage depends on
whether the absence from work results in a loss of coverage.

Q-26. Does an involuntary termination of employment include retirement?

A-26. Generally, no. In general, a retirement is a voluntary termination of
employment. However, if the facts and circumstances indicate that, absent retirement,
the employer would have terminated the employee’s employment, that the employee
was willing and able to continue employment, and that the employee had knowledge
that the employee would be terminated absent the retirement, the retirement is an
involuntary termination of employment.

Q-27. Does involuntary termination of employment include involuntary
termination of employment for cause?

A-27. Yes. However, if the termination of employment is due to gross
misconduct of the employee, the termination is not a qualifying event and the loss of the
health coverage of the employee and other family members by reason of the

employee’s termination of employment does not lead to eligibility for COBRA
continuation coverage. Therefore, the loss of coverage due to a termination of
employment for gross misconduct will not result in an individual becoming a potential
Assistance Eligible Individual.

Q-28. Does an involuntary termination of employment include a resignation as
the result of a material change in the geographic location of employment for the
employee?

A-28. Yes.

Q-29. Does an involuntary termination of employment include participation by an
employee in a window program under which employees with impending terminations of
employment are offered a severance arrangement to terminate employment within a
specified period of time (the “window”)?

A-29. Yes. An involuntary termination of employment includes participation in a
window program that meets the requirements of Treas. Reg. § 31.3121(v)(2)-1(b)(4)(v).
See those regulations for further information including certain time limits applicable to
the window and limits on the ability to have successive windows.

Q-30. Does an involuntary termination of employment occur because the
termination of employment is for “good reason” if an employee terminates employment
because of concerns about workplace safety due to a health condition of the employee
or a family member of the employee?

A-30. In general, an employee’s termination of employment due to general
concerns about workplace safety is not treated as an involuntary termination of
employment. However, a termination of employment would be involuntary if the
employee can demonstrate that the employer’s actions (or inactions) resulted in a
material negative change in the employment relationship analogous to a constructive
discharge. A departure due to the personal circumstances of the employee unrelated to
an action or inaction of the employer, such as a health condition of the employee or a
family member, inability to locate daycare, or other similar issues, generally will not rise
to the level of being analogous to a constructive discharge absent the employer’s failure
to either take a required action or provide a reasonable accommodation.

Q-31. Is an individual whose qualifying event is an employee-initiated
termination of employment because a child is unable to attend school or because
another childcare facility is closed due to the COVID-19 National Emergency a potential
Assistance Eligible Individual?

A-31. No. However, if the individual maintains the ability to return to work, and
the facts and circumstances indicate that the qualifying event is a temporary leave of
absence such that the employer and employee intend to maintain the employment
relationship, the qualifying event is a voluntary reduction in hours and the individual

would be a potential Assistance Eligible Individual.

Q-32. Does an involuntary termination of employment include a termination of
employment initiated by the employee in response to an involuntary material reduction in
hours that did not result in a loss of coverage?

A-32. Yes. For purposes of COBRA premium assistance, an employee-initiated
termination of employment in response to an involuntary material reduction in hours is
treated as a termination for good reason. Thus, an employee-initiated termination of
employment due to an involuntary material reduction in hours would be an involuntary
termination of employment for purposes of COBRA premium assistance.

Q-33. Is the death of an employee an involuntary termination of employment that
makes qualified beneficiaries such as the spouse and dependent children of the
employee potential Assistance Eligible Individuals?

A-33. No. The death of an employee is not a reduction in hours or an involuntary
termination of employment, so a loss of coverage due to the employee’s death would
not result in the spouse and dependent children of the employee being potential
Assistance Eligible Individuals.

Q-34. Does an involuntary termination of employment include an employer’s
decision not to renew an employee’s contract, including for an employee whose
employer is a staffing agency?

A-34. Generally, yes. An employer’s decision not to renew an employee’s
contract will be considered an involuntary termination of employment if the employee
was otherwise willing and able to continue the employment relationship and was willing
either to execute a contract with terms similar to those of the expiring contract or to
continue employment without a contract. However, if the parties understood at the time
they entered into the expiring contract, and at all times when services were being
performed, that the contract was for specified services over a set term and would not be
renewed, the completion of the contract without it being renewed is not an involuntary
termination of employment.

COVERAGE ELIGIBLE FOR COBRA PREMIUM ASSISTANCE

Q-35. Is COBRA premium assistance available for COBRA continuation
coverage under a vision-only or dental-only plan?

A-35. Yes. COBRA premium assistance is available for COBRA continuation
coverage of any group health plan, except a health FSA under § 106(c) offered under a
§ 125 cafeteria plan. Group health plans include vision-only and dental-only plans,
regardless of whether the employer pays for a portion of the premiums for active
employees. COBRA premium assistance is not available for continuation coverage
offered by employers for non-health benefits that are not subject to Federal COBRA

continuation coverage requirements, such as group-term life insurance. (See Q&A-55
regarding eligibility for COBRA continuation coverage for distinct benefit options).

Q-36. May retiree health coverage be treated as COBRA continuation coverage
for which COBRA premium assistance is available?

A-36. Yes, but only if the retiree coverage is offered under the same group
health plan as the coverage made available to similarly situated active employees,
though the amount charged for the retiree coverage may be higher than that charged to
active employees. In that case, the retiree coverage may still be eligible for the COBRA
premium assistance as long as the amount charged to a retiree does not exceed the
maximum amount allowed under Federal COBRA.

Q-37. Is COBRA premium assistance available for COBRA continuation
coverage under a health reimbursement arrangement (HRA)?

A-37. Yes. Note that, for purposes of the ARP, COBRA continuation coverage
does not include a health FSA provided through a § 125 cafeteria plan paid for with
salary reduction amounts. Even though, under some circumstances, an HRA may
qualify as a health FSA under § 106(c)(2), such an HRA would not be excluded from the
ARP’s definition of COBRA continuation coverage because the HRA would be paid for
with employer contributions, not salary reduction amounts contributed through a § 125
cafeteria plan.

Q-38. Does eligibility for coverage under an HRA end the period of COBRA
premium assistance under the ARP in the same way as eligibility for coverage under
any other group health plan?

A-38. Yes, unless the HRA qualifies as a health FSA under § 106(c)(2). Under
§ 106(c)(2)(B), a health FSA is health coverage under which the maximum amount of
reimbursement that is reasonably available to a participant for the coverage is less than
500 percent of the value of the coverage. For this purpose, the maximum amount of
reimbursement that is reasonably available generally would be the balance of the HRA,
and the value of the HRA coverage generally would be the applicable premium for
COBRA continuation of the HRA coverage, not taking into account COBRA premium
assistance.

Q-39. Is COBRA premium assistance available for COBRA continuation
coverage under an HRA integrated with individual health insurance coverage (an
individual coverage HRA)?

A-39. Yes. In the case of an individual coverage HRA, the COBRA continuation
coverage applies only to the individual coverage HRA and not to the underlying
individual health insurance coverage. The qualified beneficiary with COBRA
continuation coverage must still incur and substantiate covered medical care expenses
(which may include health insurance premiums) to be reimbursed by the individual

coverage HRA. Although an individual coverage HRA may include an HRA integrated
with Medicare, a qualified beneficiary eligible for Medicare cannot be an Assistance
Eligible Individual; thus, COBRA premium assistance is not available if the COBRA
continuation coverage is under an individual coverage HRA integrated with Medicare.
(See Q&A-70 regarding the calculation of the premium assistance credit in the case of
an individual coverage HRA.)

Q-40. Is COBRA premium assistance available for coverage under a QSEHRA
as defined in § 9831(d)?

A-40. No. A QSEHRA is not a group health plan eligible for COBRA continuation
coverage.

Q-41. Pursuant to § 9501(a)(1)(B) of the ARP, a plan sponsor allows an
Assistance Eligible Individual to enroll in coverage under a plan that is different than the
coverage the individual was enrolled in at the time of the qualifying event. Does the
requirement that the premium for the different coverage elected not exceed the
premium for coverage that the individual was enrolled in at the time of the qualifying
event simply limit the amount of the COBRA premium assistance, thereby allowing the
individual to elect a plan with a higher premium but restricting the amount of COBRA
premium assistance to the amount of the premium for the coverage that the individual
was enrolled in at the time of the qualifying event (with the individual or employer paying
the excess over the COBRA premium assistance)?

A-41. No. Unless otherwise allowed under the COBRA regulations or other
applicable law, coverage with a premium greater than the premium for the coverage that
the individual was enrolled in at the time of the qualifying event is not eligible for the
COBRA premium assistance. However, the requirements in § 9501(a)(1)(B) of ARP do
not apply to a situation in which the plan in which the individual was enrolled at the time
of the qualifying event is not available (see Q&A-42).

Example: An individual is an Assistance Eligible Individual who was enrolled in a
plan with an $800 per month COBRA premium at the time of the qualifying event. The
employer sponsoring the plan permits Assistance Eligible Individuals to enroll in other
coverage pursuant to § 9501(a)(1)(B) of the ARP. Three other coverages are offered to
active employees similarly situated to the individual, none of which are excepted
benefits, a QSEHRA or a health FSA. The COBRA premiums for the other coverages
are $700, $750 or $1,000 per month. The individual may enroll in the $700 or $750 per
month options with COBRA premium assistance. If the employer allows, the individual
may enroll in the $1,000 per month coverage option but that coverage will not be eligible
for the COBRA premium assistance. (But see Q&A-69 regarding the availability of
COBRA premium assistance for an Assistance Eligible Individual electing a different
benefit package in compliance with § 54.4980B-8, Q&A-2(c), such as during open
enrollment.)

Q-42. If a potential Assistance Eligible Individual elects COBRA continuation

coverage during the ARP extended election period but the employer no longer offers the
health plan that previously covered the individual, must the employer place that
individual in the plan most similar to the prior plan, provided the employer offers other
health plans?

A-42. Yes. If an employer no longer offers the health plan that previously
covered the potential Assistance Eligible Individual, the individual must be offered the
opportunity to elect the plan that a similarly situated active employee would have been
offered that is most similar to the previous plan that covered the individual, even if the
premium for the plan is greater than the premium for the previous plan. In this case, the
other coverage elected by the individual is eligible for the COBRA premium assistance,
regardless of the premium for that coverage.

BEGINNING OF COBRA PREMIUM ASSISTANCE PERIOD

Q-43. When is an Assistance Eligible Individual first entitled to receive COBRA
premium assistance?

A-43. An Assistance Eligible Individual is entitled to receive COBRA premium
assistance as of the first applicable period of coverage beginning on or after April 1,
2021. For this purpose, a period of coverage is a monthly or shorter period with respect
to which premiums are normally charged by the plan or issuer with respect to such
coverage provided to employees and qualified beneficiaries. The start date of the first
period of coverage beginning on or after April 1, 2021, depends on the period with
respect to which premiums would have been normally charged by the plan if the
individual had paid the premium.

Example: Plan provides that employees and qualified beneficiaries pay premiums
for health coverage, including COBRA continuation coverage, on a biweekly basis for a
corresponding two-week period of coverage. For March 2021, the last two-week period
of coverage is from March 28 through April 10, 2021, followed by a period of coverage
from April 11 through April 24, 2021. COBRA premium assistance could apply with
respect to the premium for the period of coverage beginning April 11, 2021.

Q-44. Must an Assistance Eligible Individual electing COBRA continuation
coverage under the ARP extended election period begin coverage as of the first period
of coverage beginning on or after April 1, 2021?

A-44. No. While a group health plan must make COBRA continuation coverage
with COBRA premium assistance available as of the first period of coverage beginning
on or after April 1, 2021, in the case of an Assistance Eligible Individual electing
COBRA continuation coverage under the ARP extended election period, the Assistance
Eligible Individual may waive COBRA continuation coverage for any period before
electing to receive COBRA premium assistance, including retroactive periods of
coverage beginning prior to April 1, 2021.

Example: An individual’s employment was involuntarily terminated and as a
result the individual lost health coverage on October 1, 2020. The individual received
the COBRA election notice on October 1, 2020. The individual enrolls in an individual
health insurance policy on the Health Insurance Exchange, effective on November 1,
2020. The individual receives the notice of the ARP extended election period on May 1,
2021. At that time, the individual is not eligible to enroll in any other group health plan or
Medicare. The individual may elect COBRA continuation coverage either retroactively to
October 1, 2020, retroactively to April 1, 2021, or prospectively. The individual elects
COBRA continuation coverage prospectively from June 1, 2021, and contacts the
Health Insurance Exchange to end the Exchange health insurance policy as of May 31,
2021. The individual is an Assistance Eligible Individual as of June 1, 2021. Because
there is no overlapping coverage, the individual is not required to repay any APTC when
the individual files his or her 2021 tax return.

Q-45. If an employer is no longer subject to Federal COBRA due to a reduction
in the number of employees, is the employer still required to provide the ARP extended
election period to individuals who had a qualifying event that was a reduction in hours or
involuntary termination of employment while the employer was subject to COBRA, and
are those qualified beneficiaries potential Assistance Eligible Individuals?

A-45. Yes. Whether a qualified beneficiary is eligible to elect Federal COBRA
continuation coverage is determined by the employer’s status at the time of the
qualifying event, and whether a qualified beneficiary is a potential Assistance Eligible
Individual who may elect COBRA continuation coverage during the ARP extended
election period is determined by whether the qualified beneficiary was eligible to elect
COBRA continuation coverage at the time of the qualifying event.

Example: Based on the number of employees from the preceding calendar year,
an employer is not a small employer for the 2020 calendar year, but is a small employer
for calendar year 2021. As a result, Federal COBRA requirements apply to the
employer for calendar year 2020 but not calendar year 2021. An individual has a
qualifying event that is an involuntary termination of employment in November of 2020.
Because the qualified beneficiary’s qualifying event occurred during the 2020 calendar
year when the employer was not a small employer and the plan was subject to Federal
COBRA requirements, the employer is required to provide the ARP extended election
period and the qualified beneficiary is eligible to elect Federal COBRA continuation
coverage with COBRA premium assistance.

Q-46. Is COBRA premium assistance available for periods of coverage from
April 1, 2021, through September 30, 2021, if the election for COBRA continuation
coverage is made after September 30, 2021?

A-46. Yes, but only if the individual makes the election within the applicable 60-
day election period. A qualified beneficiary who is a potential Assistance Eligible
Individual has 60 days to elect COBRA continuation coverage after being provided
either the general notice under § 9501(a)(5)(A) of the ARP (for a qualifying event after

April 1, 2021), or the notice regarding the ARP extended election period under
§ 9501(a)(5)(C) (with respect to a qualifying event before April 1, 2021). If the individual
makes the COBRA election after September 30, 2021, but within the applicable 60-day
period, then the individual is entitled to COBRA premium assistance through the earlier
of the last period of coverage beginning on or before September 30, 2021, or the date
that COBRA continuation coverage expires. COBRA premium assistance would start
with the later of the first period of coverage beginning on or after April 1, the date of the
qualifying event, or the date the qualified beneficiary elects to begin COBRA
continuation coverage.

END OF COBRA PREMIUM ASSISTANCE PERIOD

Q-47. For how long is COBRA premium assistance available to an Assistance
Eligible Individual?

A-47. COBRA premium assistance applies until the earliest of (1) the first date
the Assistance Eligible Individual becomes eligible for other group health plan coverage
(with certain exceptions) or Medicare coverage, (2) the date the individual ceases to be
eligible for COBRA continuation coverage, or (3) the end of the last period of coverage
beginning on or before September 30, 2021.

Example: A plan provides that employees and qualified beneficiaries pay
premiums for health coverage, including COBRA continuation coverage, on a biweekly
basis for a corresponding two-week period of coverage. For September 2021, the last
two-week period of coverage is from September 19 through October 2, 2021. COBRA
premium assistance would apply with respect to the entire period of coverage beginning
September 19, even though the period of coverage includes coverage for October 1 and
October 2, 2021.

Q-48. Once subsidized COBRA continuation coverage ends with the period of
coverage including September 30, 2021, does coverage for a qualified beneficiary who
was an Assistance Eligible Individual automatically continue with unsubsidized COBRA
and, if so, when is the payment for the first subsequent period of coverage due?

A-48. COBRA continuation coverage automatically continues, and the payment
for the first period of coverage after September 30, 2021 will be timely if paid according
to the terms of the plan or coverage, subject to applicable COBRA continuation
coverage requirements taking into account the Emergency Relief Notices.

Q-49. What are the consequences if an Assistance Eligible Individual fails to
provide notice that the individual is no longer eligible for COBRA premium assistance
due to eligibility for coverage under another group health plan or Medicare?

A-49. An Assistance Eligible Individual who fails to provide notice may be
subject to a Federal tax penalty of $250 for each failure to notify the employer, plan, or
issuer. If the failure to provide notice is fraudulent, the penalty will be the greater of

$250 or 110 percent of the COBRA premium assistance improperly received. The
penalty will not apply if the individual’s failure to provide notice was due to reasonable
cause and not to willful neglect. The employer, plan, or issuer who received the
premium assistance credit in the amount of the excess COBRA premium assistance
has no right to the penalty payment.

Q-50. Does the death of an employee who has had a reduction in hours or
involuntary termination of employment end the eligibility for COBRA premium
assistance of any qualified beneficiary spouse and dependent children?

A-50. No.

EXTENDED ELECTION PERIOD

Q&A-51 through Q&A-55 apply only for purposes of Federal COBRA, unless the
Q&A indicates otherwise.

Q-51. If an employee had a reduction in hours or an involuntary termination of
employment before April 1, 2021 and elected self-only COBRA continuation coverage,
may a spouse or a dependent child who is a qualified beneficiary in connection with the
reduction in hours or involuntary termination of employment elect COBRA continuation
coverage and receive COBRA premium assistance under the ARP extended election
period?

A-51. Yes. A qualified beneficiary who does not have an election of COBRA
continuation coverage in effect on April 1, 2021, but who would have been an
Assistance Eligible Individual if the election were in effect, may elect COBRA
continuation coverage under the ARP extended election period. A spouse or dependent
child who is a beneficiary under a group health plan that covers an employee on the day
before the reduction in hours or involuntary termination of employment of the employee
also would have been an Assistance Eligible Individual if the spouse or dependent child
had elected COBRA continuation coverage. Thus, a spouse or dependent child in this
situation has a second election opportunity, notwithstanding the prior election of self-
only COBRA continuation coverage by the employee.

Q-52. Is the ARP extended election period available to an individual if the
continuation coverage is provided only under State law (and not Federal COBRA)?

A-52. No. The ARP extended election period under § 9501(a)(4)(A) applies only
to a group health plan that is subject to Federal COBRA. It does not apply to plans
subject to continuation coverage requirements under a State program that provides
comparable continuation coverage. However, if a State law or program provides for a
similar extended election right and an individual otherwise satisfies the requirements to
be an Assistance Eligible Individual, COBRA premium assistance is available for any
resulting period of COBRA continuation coverage for periods of coverage from April 1,
2021, through September 30, 2021.

Q-53. May a potential Assistance Eligible Individual whose qualifying event
occurred before April 1, 2021, who still has an open COBRA continuation coverage
election period independent of the ARP (including an extended period for electing
coverage under the Emergency Relief Notices), elect COBRA continuation coverage
under the ARP extended election period and receive COBRA continuation coverage
with COBRA premium assistance that starts with a period of coverage beginning only
on or after April 1, 2021?

A-53. Yes. The extended election period for electing COBRA continuation
coverage is available for a potential Assistance Eligible Individual if the qualifying event
occurred before April 1, 2021, and if the individual has not yet elected COBRA
continuation coverage, including for an individual who has an open COBRA election
period as of April 1, 2021. If the individual elects retroactive COBRA continuation
coverage under the original COBRA election period available prior to the ARP extended
election period under Federal COBRA, COBRA continuation coverage is retroactive to
that individual’s loss of coverage. COBRA premium assistance, however, does not
apply to periods of coverage prior to the first period of coverage beginning on or after
April 1, 2021.

Example: An individual is involuntarily terminated from employment on December
15, 2020 and receives the COBRA election notice on January 4, 2021. As of April 1,
2021, the individual has not elected COBRA continuation coverage. The individual must
receive a notice of the ARP extended election period for COBRA continuation coverage.
The individual may elect COBRA continuation coverage under the original COBRA
election period (as extended by the Emergency Relief Notices) but will be eligible for
COBRA premium assistance only for periods of coverage beginning on or after April 1,
2021. Alternatively, the individual may decline to elect COBRA continuation coverage
under the original COBRA election period (as extended by the Emergency Relief
Notices) and instead elect COBRA continuation coverage under the ARP extended
election period only for periods of coverage beginning on or after April 1, 2021.

Q-54. How does an election of COBRA continuation coverage under the ARP
extended election period apply in the case of an HRA if the Assistance Eligible
Individual elects COBRA continuation coverage solely under the ARP extended election
period, and declines to elect coverage that is retroactive to the qualifying event?

A-54. With respect to an election of COBRA continuation coverage for an HRA
solely under the ARP extended election period, the HRA may no longer reimburse
expenses incurred after the qualifying event that led to the loss of coverage and before
the first day of the first period of coverage beginning on or after April 1, 2021. Generally,
qualified beneficiaries electing COBRA continuation coverage with respect to HRA
coverage have access to the same level of reimbursements during COBRA continuation
coverage as was available immediately before the qualifying event. Thus, a qualified
beneficiary electing COBRA continuation coverage with respect to an HRA under the
ARP extended election period will have access to the same level of reimbursements as

the qualified beneficiary had immediately before the qualifying event based on the
amount originally available for the HRA plan year and reimbursements for expenses
incurred before the qualifying event, reduced by the amount of any reimbursements
made after the qualifying event; for example, reimbursements for expenses incurred
before the qualifying event that were submitted and reimbursed after the qualifying
event.

Q-55. If a qualified beneficiary due to a reduction of hours or an involuntary
termination of employment was previously offered COBRA continuation coverage with
respect to both comprehensive health coverage and dental-only or vision-only coverage
and the qualified beneficiary elected COBRA continuation coverage only with respect to
the dental-only or vision-only coverage, is the qualified beneficiary still a potential
Assistance Eligible Individual who must be offered the ARP extended election with
respect to the comprehensive health coverage?

A-55. Yes. A qualified beneficiary whose qualifying event was a reduction in
hours or an involuntary termination of employment is a potential Assistance Eligible
Individual and must be offered the ARP extended election period with respect to any
health coverage the qualified beneficiary was enrolled in prior to the qualifying event
and for which the individual does not have a COBRA election in effect on April 1, 2021,
even if the qualified beneficiary previously elected COBRA continuation coverage with
respect to other coverage in which the qualified beneficiary was previously enrolled. If
the qualified beneficiary elects additional COBRA continuation coverage pursuant to the
ARP extended election period, the qualified beneficiary is an Assistance Eligible
Individual with respect to all elected COBRA continuation coverage.

EXTENSIONS UNDER THE EMERGENCY RELIEF NOTICES

Q-56. What is the election period for a potential Assistance Eligible Individual to
make the election for COBRA premium assistance if the individual is also eligible to
elect COBRA continuation coverage under the Emergency Relief Notices?

A-56. If a qualified beneficiary received a COBRA notice under § 4980B before
April 1, 2021, and also receives the notice of the ARP extended election period, then,
within 60 days of receiving the notice of the ARP extended election period, the qualified
beneficiary may elect COBRA continuation coverage with COBRA premium assistance
for periods of coverage beginning on or after April 1, 2021. If a qualified beneficiary
elects COBRA continuation coverage with COBRA premium assistance, the individual
must also elect or decline COBRA continuation coverage retroactive to the loss of
coverage, if eligible, within 60 days of receiving the notice of the ARP extended election
period. If the qualified beneficiary elects retroactive COBRA continuation coverage, the
qualified beneficiary may be required to pay COBRA premiums for periods of coverage
beginning before April 1, 2021.

Q-57. Do the extensions of timeframes available under the Emergency Relief
Notices apply to the required furnishing of the notice of an ARP extended election

period under § 9501(a)(5)(C), or to the ARP extended election period to elect COBRA
continuation coverage with COBRA premium assistance beginning on or after April 1,
2021, under § 9501(a)(4)?

A-57. No. The extensions of timeframes available under the Emergency Relief
Notices do not apply to either the required furnishing of a notice of an ARP extended
election period under § 9501(a)(5)(C) or to the ARP extended election period. The
notice of the ARP extended election period under § 9501(a)(5)(C) must be furnished by
May 31, 2021 (60 days after April 1, 2021). An individual receiving the notice must elect
COBRA continuation coverage no later than 60 days after the notice is provided in order
to receive COBRA premium assistance.

Q-58. If a potential Assistance Eligible Individual elects retroactive COBRA
continuation coverage, how do the Emergency Relief Notices apply to payment of the
premiums for the retroactive coverage and what are the consequences if the premiums
are not timely paid?

A-58. The extensions of timeframes under the Emergency Relief Notices remain
available for premium payments for the retroactive periods of coverage for potential
Assistance Eligible Individuals and those who have enrolled in COBRA continuation
coverage with COBRA premium assistance. If an Assistance Eligible Individual also
elects retroactive coverage for a period beginning before April 1, 2021, the employer
may require the individual to pay the premiums for that period of COBRA continuation
coverage consistent with the timeframes as extended under the Emergency Relief
Notices. If, by an applicable deadline, the individual fails to pay any amount towards the
total premiums due for periods of retroactive COBRA continuation coverage, the
employer may treat the individual as having not elected COBRA coverage until the first
period of coverage beginning on or after April 1, 2021. If, by the applicable deadline, the
individual pays only a portion of the total premiums due for retroactive coverage, the
plan may credit those premiums to the earliest months of the retroactive COBRA
continuation coverage and resume providing COBRA continuation coverage as of the
first period of coverage beginning on or after April 1, 2021.

Example: On November 1, 2020, an individual becomes a qualified beneficiary
as the result of an involuntary termination of employment and receives the COBRA
election notice under § 4980B(f)(6)(D). On April 30, 2021, the individual receives the
notice of the ARP extended election period. On May 31, 2021, the individual elects both
retroactive COBRA continuation coverage beginning on November 1, 2020, and
COBRA continuation coverage with premium assistance for the first period of coverage
beginning on or after April 1, 2021. The individual pays premiums for only three months
of retroactive COBRA within the applicable payment deadlines. The individual makes no
other premium payments before the applicable deadlines. The plan may treat the
individual as having retroactive COBRA continuation coverage only for November 2020,
December 2020, and January 2021, and as having no retroactive COBRA coverage for
February 2021 and March 2021 (because only three months of premiums were paid).
Because the individual also elected COBRA continuation coverage with premium

assistance for the first period of coverage beginning on or after April 1, 2021, the
individual has COBRA continuation coverage with premium assistance for the first
period of coverage beginning on or after April 1, 2021 through the end of the period of
coverage that includes September 30, 2021, assuming the individual remains eligible for
premium assistance throughout that period.

Q-59. May a potential Assistance Eligible Individual who elects COBRA
continuation coverage with COBRA premium assistance and who declines to elect
retroactive COBRA continuation coverage at that time later elect retroactive COBRA
continuation coverage?

A-59. No. If a potential Assistance Eligible Individual elects COBRA continuation
coverage with COBRA premium assistance but declines to elect COBRA continuation
coverage that would begin at the time of a qualifying event that occurred before April 1,
2021, that individual may not, after the 60-day extended election period for electing
COBRA continuation coverage under the ARP has ended, later elect COBRA
continuation coverage that begins at the time of the qualifying event.

Example: An individual has a qualifying event that is an involuntary termination of
employment on March 1, 2021, and receives the COBRA election notice the same day.
The individual receives the notice of the ARP extended election period on May 31,
2021, and elects COBRA continuation coverage with COBRA premium assistance
starting April 1, 2021. Assuming the Outbreak Period has not ended, the individual does
not remain eligible after July 30, 2021 (60 days from the receipt of the individual’s notice
of the ARP extended election period), to elect COBRA continuation coverage starting
March 1, 2021, despite the extensions available under the Emergency Relief Notices.

PAYMENTS TO INSURERS UNDER FEDERAL COBRA

Q-60. In the case of an insured plan subject to Federal COBRA that is not a
multiemployer plan, if the insurer and the employer have agreed that the insurer will
collect the COBRA premiums directly from the qualified beneficiaries, is the insurer
required to treat an Assistance Eligible Individual as having paid the full premium?

A-60. Yes. If the insurer fails to treat the Assistance Eligible Individual as having
made a payment of the full premium, the insurer may be liable for the excise tax under
§ 4980B(e)(1)(B), which applies to each person responsible (other than in a capacity as
an employee) for administering or providing benefits under the plan and whose act or
failure to act caused (in whole or in part) the failure, if the person assumed responsibility
for the performance of the act to which the failure relates. Notwithstanding the
agreement between the employer and the insurer, the employer is required to pay the
premium to the insurer for the months of COBRA premium assistance with respect to
the individual.

COMPARABLE STATE CONTINUATION COVERAGE

Q-61. Does a State continuation coverage program fail to provide comparable
coverage qualifying for COBRA premium assistance under the ARP solely because the
maximum period of continuation coverage under the program differs from the maximum
period available under Federal COBRA?

A-61. No. A different period of continuation coverage under a State continuation
coverage program does not by itself mean a State program fails to provide comparable
coverage to Federal COBRA continuation coverage under the ARP. For example, the
fact that a State continuation coverage program provides only six months of
continuation coverage (instead of 18 months) would not by itself result in the State
program failing to provide comparable coverage. Similarly, State programs providing for
different qualifying events, different qualified beneficiaries, or different maximum
premiums generally do not fail to provide comparable coverage solely for those
reasons.

Q-62. In the case of an insured plan subject solely to State law requiring the
insurer to provide continuation coverage, is the employer eligible to take the premium
assistance credit directly if the employer pays the full premium to the insurer?

A-62. No. Under § 6432(b)(3), in the case of an insured plan subject solely to
State law with respect to the requirement to provide continuation coverage, the premium
payee is the insurer providing the coverage under the group health plan. The Treasury
Department and the IRS are aware that this requirement may create administrative
issues for certain Small Business Health Options Program (SHOP) exchanges that
aggregate premiums paid by participating employers or where State rules require full
payment of premiums by the employer; the Treasury Department and the IRS are
continuing to consider this issue.

CALCULATION OF COBRA PREMIUM ASSISTANCE CREDIT

Q-63. As a general rule, what is the amount of the premium assistance credit for
a quarter?

A-63. If the employer does not subsidize COBRA premium costs for similarly
situated qualified beneficiaries who are not Assistance Eligible Individuals, the credit for
a quarter is the amount equal to the premiums not paid by Assistance Eligible
Individuals for COBRA continuation coverage due to the application of § 9501(a)(1) of
the ARP for the quarter. In this case, the amount of the premiums not paid by the
Assistance Eligible Individuals is the premium amount charged for COBRA continuation
coverage to other similarly situated covered employees and qualified beneficiaries (for
example, coverage for a single individual, individual plus one, or family who are not
Assistance Eligible Individuals). The premium amount also includes any administrative
costs otherwise allowed (that is, generally 102 percent of the applicable premium under
§ 4980B(f)(4)) (see Q&A-64).

Q-64. What is the amount of the premium assistance credit if the employer

subsidizes the COBRA premium costs for similarly situated covered employees and
qualified beneficiaries who are not Assistance Eligible Individuals?

A-64. The amount of the credit is the premium that would have been charged to
an Assistance Eligible Individual in the absence of the premium assistance, and does
not include any amount of subsidy that the employer would have otherwise provided.
Thus, absent the premium assistance, if the premium that the employer would have
charged to an Assistance Eligible Individual is less than the maximum COBRA
premium—for example, if the employer would have subsidized the coverage by paying
all or part of the premium—the credit is equal to the amount that the employer actually
would have charged to the Assistance Eligible Individual.

For the following examples, assume 102 percent of the applicable premium for
COBRA continuation coverage is $1,000 per month, and the premium payee is the
common law employer maintaining the plan.

Example 1: Absent the COBRA premium assistance, the common law employer
requires individuals electing COBRA continuation coverage to pay $500 per month. The
credit is $500 per month.

Example 2: The common law employer requires active employees to pay $200
per month for health coverage. Absent the COBRA premium assistance, for involuntarily
terminated employees, severance benefits include continued health coverage at the
cost of $200 per month for three months after termination. After the three-month
severance period, the terminated employee must pay $1,000 per month for the
remainder of COBRA continuation coverage. The common law employer considers the
loss of coverage to occur on the last day coverage is in effect before the severance
benefits begin; that is, the common law employer considers the three-month severance
period (during which the employer pays $800 toward the cost of the terminated
employee’s COBRA continuation coverage) to be part of the terminated employee’s
COBRA continuation period of coverage.

A potential Assistance Eligible Individual has an involuntary termination of
employment as of April 1, 2021, and makes the COBRA continuation election effective
as of that date. For April, May, and June 2021, the credit is $200 per month. For July,
August, and September 2021, the credit is $1,000 per month.

Example 3: Same facts as Example 2, except that the common law employer
considers the loss of health coverage and the beginning of the terminated employee’s
COBRA continuation period of coverage to occur at the end of the three-month
severance period. For the first three months after termination of employment, the
terminated employee is not eligible for COBRA continuation coverage and is not an
Assistance Eligible Individual. Instead, the employee pays $200 for coverage that is not
a premium for COBRA continuation coverage. The employee receives severance
benefits for health coverage beginning on April 1, 2021, and then elects COBRA
continuation coverage beginning on July 1, 2021 (after the end of the three-month

severance period) and becomes an Assistance Eligible Individual. The credit is $0 per
month for April, May, and June 2021, and $1,000 per month for July, August, and
September 2021.

Example 4: Same facts as Example 2, except that for involuntarily terminated
employees, the severance benefits include continued health coverage at no cost for the
three months after termination of employment.

Because the monthly premium (absent the COBRA premium assistance) during
April, May, and June 2021 is zero, COBRA premium assistance is not available and
there is no credit for those months. After the severance period, the terminated employee
is entitled to COBRA continuation coverage with COBRA premium assistance for July,
August, and September 2021. The credit is $1,000 per month for July, August, and
September 2021.

Q-65. If a plan that previously charged less than the maximum premium allowed
under the COBRA continuation provisions increases the premium for similarly situated
covered employees and qualified beneficiaries pursuant to § 54.4980B-8, Q&A-2(b)(1)
(or similar authority under comparable State law or other Federal law), does the COBRA
premium assistance apply to the increased premium amount?

A-65. Yes.

Example: Under the plan, 102 percent of the applicable premium for COBRA
continuation coverage is $1,000 per month. For periods of coverage before April 1,
2021, the plan charged $500 per month for COBRA continuation coverage. Pursuant to
§ 54.4980B-8, Q&A-2(b)(1) and the applicable notice requirements, beginning April 1,
2021, the plan charges $1,000 per month for COBRA continuation coverage for all
covered employees and qualified beneficiaries. The COBRA premium assistance and
the premium assistance credit are $1,000 per Assistance Eligible Individual per month
for the coverage beginning April 1, 2021.

Q-66. If a plan that previously charged less than the maximum premium allowed
under the COBRA continuation provisions increases the premium pursuant to
§ 54.4980B-8, Q&A-2(b)(1), and the employer provides a separate taxable payment to
the Assistance Eligible Individual, does the premium assistance credit apply to the
increased premium amount?

A-66. Yes.

Example: Under a group health plan, 102 percent of the applicable premium for
COBRA continuation coverage is $1,000 per month. Before April 1, 2021, the plan
charged $400 per month for COBRA continuation coverage. Pursuant to § 54.4980B-8,
Q&A-2(b)(1), and the applicable notice requirements, the plan charges all covered
employees and qualified beneficiaries $1,000 per month for COBRA continuation
coverage for periods of coverage beginning April 1, 2021. In addition, beginning April 1,

2021, the employer provides a taxable severance benefit of $600 per month to
employees who are Assistance Eligible Individuals. An Assistance Eligible Individual is
entitled to COBRA continuation coverage without payment of any premium. The credit is
$1,000.

Q-67. If COBRA continuation coverage is provided under a State program that
provides comparable continuation coverage, does the premium assistance credit apply
to portions of the premium attributable to COBRA continuation coverage for those
individuals who would not be qualified beneficiaries under Federal COBRA?

A-67. No. While § 9501(a)(9)(B) of the ARP defines the COBRA continuation
coverage eligible for COBRA premium assistance to include comparable State
continuation coverage, a qualified beneficiary is defined under § 9501(a)(9)(E) by cross-
reference to § 607(3) of ERISA. Thus, COBRA premium assistance is limited to the
premium attributable to the coverage of the employee who was involuntarily terminated
(other than by reason of such employee’s gross misconduct) or had a reduction in hours
as a qualifying event and that employee’s spouse or dependent children who are
qualified beneficiaries under Federal COBRA, even if the State law requires a group
health plan to provide continuation coverage to a broader group of individuals (for
example, another member of the individual’s household who is not the spouse or a
dependent child).

Q-68. If COBRA continuation coverage of one or more Assistance Eligible
Individuals also covers one or more individuals who are not Assistance Eligible
Individuals, how is the premium for the COBRA continuation coverage allocated among
the Assistance Eligible Individuals and the other individuals in determining the premium
assistance credit?

A-68. The premium amounts for COBRA continuation coverage for one or more
individuals who are Assistance Eligible Individuals and one or more individuals who are
not Assistance Eligible Individuals are allocated first to the premiums for the Assistance
Eligible Individuals, based on the cost of COBRA continuation coverage (without
COBRA premium assistance) for only Assistance Eligible Individuals, and then to the
premiums for the individuals who are not Assistance Eligible Individuals. Thus, if the
total cost of the coverage for all covered individuals does not exceed the premium costs
for the Assistance Eligible Individuals alone, then the premium for the individual who is
not an Assistance Eligible Individual is zero, and the COBRA premium assistance is the
full applicable premium amount of the COBRA continuation coverage. If the coverage of
an individual who is not an Assistance Eligible Individual increases the total COBRA
premium for all individuals, that incremental additional cost is not COBRA premium
assistance for purposes of the credit.

Example 1: An employee and the employee’s two dependent children are
Assistance Eligible Individuals and have COBRA continuation coverage. COBRA
continuation coverage also covers an individual who lives in the same household who is
not an Assistance Eligible Individual. The amount the plan requires to be paid for

COBRA continuation coverage for self-plus-two-or-more-dependents (which includes
the individual who is not an Assistance Eligible Individual) is $1,000 per month.

The amount the employee would pay (absent the COBRA premium assistance)
for coverage for the employee and the two children (the Assistance Eligible Individuals)
for COBRA continuation coverage is $1,000 per month. The additional premium amount
for coverage of the individual who is not an Assistance Eligible Individual is $0 per
month. The employee is entitled to apply the COBRA premium assistance for the full
$1,000 premium amount per month. The credit is $1,000 per month.

Example 2: Same facts as Example 1, except the employee has only one
dependent child, and the plan charges $800 per month for self-plus-one-dependent
COBRA continuation coverage. The portion of the premium attributable to coverage for
the individual and the individual’s dependent child (both Assistance Eligible Individuals)
is $800 per month.

The employee is entitled to apply the COBRA premium assistance to the $800
per month attributable to the Assistance Eligible Individuals. The incremental amount
the employee pays for COBRA continuation coverage for the individual who is not an
Assistance Eligible Individual is $200 per month, so the employee’s total premium
payment is $200 per month. The credit is $800 per month.

Example 3: An employee is an Assistance Eligible Individual who has self-only
coverage that would cost $450 per month (absent the COBRA premium assistance).
During the ARP extended election period, the plan has an open enrollment period
during which it allows active employees and qualified beneficiaries to add spouses and
dependents to their health coverage. The employee adds the employee’s spouse and
dependent child, who were not covered before the employee’s qualifying event, to the
employee’s COBRA continuation coverage. Without regard to the COBRA premium
assistance, COBRA continuation coverage for self-plus-two-or-more-dependents is
$1,000 per month.

The spouse and the dependent child are not Assistance Eligible Individuals
because they were not covered by the plan on the day before the employee’s qualifying
event. The amount the employee pays for the spouse and the dependent child is $550
per month ($1,000 less $450). The employee is entitled to COBRA premium assistance
with respect to $450 per month. The credit is $450 per month.

Q-69. Does the premium assistance apply to the increased premium if the plan,
in compliance with § 54.4980B-8, Q&A-2(c), allows the Assistance Eligible Individual to
change coverage from the benefit package that covered the individual before a
reduction in hours or involuntary termination of employment to a different benefit
package with a higher applicable premium that allows for an increase in the premium
amount charged to the Assistance Eligible Individual?

A-69. Yes. (But see Q&A-42 regarding the ability of an Assistance Eligible

Individual to enroll in coverage under a plan that is different than the coverage in which
the individual was enrolled at the time of the qualifying event pursuant to
§ 9501(a)(1)(B) of the ARP.)

Q-70. How is the premium assistance credit calculated for an individual
coverage health HRA?

A-70. The credit for an individual coverage HRA is limited to 102 percent of the
amount actually reimbursed with respect to an Assistance Eligible Individual.

Example: An individual coverage HRA provides a monthly benefit of the lesser of
the premium for the individual health insurance coverage purchased by the employee or
$1,000 and charges the maximum allowable administrative fee for COBRA continuation
coverage, for a total maximum COBRA premium of $1,020. Individual A and Individual
B are Assistance Eligible Individuals and are enrolled in COBRA continuation coverage.
For April 2021, Individual A is reimbursed for a premium payment for individual health
insurance coverage of $900; Individual B is reimbursed for $1,000 of a $2,000 premium
payment for individual health insurance coverage. The credit for April is $918 with
respect to Individual A and $1,020 with respect to Individual B.

CLAIMING THE COBRA PREMIUM ASSISTANCE CREDIT

Q-71. Who is eligible for the premium assistance credit under § 6432(a) of the
Code?

A-71. Under § 6432(a) of the Code, the premium payee for continuation
coverage under § 9501(a)(1) of the ARP is eligible for the credit.

Q-72. Who is the premium payee under § 9501(a)(1) of the ARP?

A-72. The premium payee is:

(1) The multiemployer plan, in the case of a group health plan that is a
multiemployer plan (as defined in § 3(37) of ERISA);

(2) The common law employer maintaining the plan, in the case of a group health
plan, other than a multiemployer plan, that is (a) subject to Federal COBRA,
or (b) under which some or all of the coverage is not provided by insurance
(that is, a plan that is self-funded, in whole or in part);

(3) The insurer providing the coverage, in the case of any other group health plan
not described in (1) or (2) (generally, fully insured coverage subject to State
continuation coverage requirements).

Q-73. May a governmental entity be a premium payee, and therefore eligible for
the premium assistance credit?

A-73. Yes. A premium payee may include the government of any State or
political subdivision thereof, any Indian tribal government (as defined in § 139E(c)(1)),
any agency or instrumentality of any of the foregoing, and any agency or instrumentality
of the Government of the United States that is described in § 501(c)(1) and exempt from
taxation under § 501(a).

Q-74. When does the premium payee become entitled to the premium
assistance credit?

A-74.
As of the date on which the premium payee receives the potential
Assistance Eligible Individual’s election of COBRA continuation coverage, the premium
payee is entitled to the credit for premiums not paid by an Assistance Eligible Individual
by reason of § 9501(a)(1) for any periods of coverage that began before that date.
8
The
premium payee is entitled to the credit for the premiums not paid by an Assistance
Eligible Individual for each subsequent period of coverage as of the beginning of each
period of coverage that the individual does not pay the premiums by reason of
§ 9501(a)(1) in accordance with the individual’s election, without regard to when the
premium payee could have required the payment of any premium. (See Q&A-86 for
information regarding entitlement to the credit if an Assistance Eligible Individual
erroneously pays the premium.)

Example: A premium payee’s COBRA period of coverage is a calendar month
with COBRA premium payments due on the tenth day of each calendar month. The
premium payee pays its employees semi-monthly, with payroll periods ending on the
fifteenth of the month and the last day of the month. On June 17, 2021, the premium
payee receives a COBRA election from a potential Assistance Eligible Individual who
elects COBRA continuation coverage as of April 1, 2021. The premium payee is entitled
to a credit as of June 17, 2021, for the premiums not paid by the Assistance Eligible
Individual for the periods of coverage April 1, 2021, through April 30, 2021, May 1,
2021, through May 31, 2021, and June 1, 2021, through June 30, 2021. Assuming the
Assistance Eligible Individual does not notify the premium payee that the Assistance
Eligible Individual is no longer eligible for COBRA premium assistance (and the
premium payee does not otherwise become aware that the Assistance Eligible
Individual is ineligible), the premium payee becomes entitled to the credit as of July 1,
2021, for the premiums not paid by the Assistance Eligible Individual for the period of
coverage of July 1, 2021, through July 31, 2021. (Assuming the facts remain as stated,
the premium payee would be entitled to the credit on (i) August 1, 2021, for the period of
coverage of August 1, 2021, through August 31, 2021, and (ii) September 1, 2021, for
the period of coverage of September 1, 2021, through September 30, 2021.)

Q-75. How does a premium payee claim the premium assistance credit?

A-75. A premium payee claims the credit by reporting the credit (both the

8
A period of coverage is defined under § 9501(a)(9)(H) as a monthly or a shorter period with respect to
which premiums are charged by the plan or issuer.

nonrefundable and refundable portions of the credit, as applicable) and the number of
individuals receiving COBRA premium assistance on the designated lines of its federal
employment tax return(s), usually Form 941, Employer’s Quarterly Federal Tax Return.

In anticipation of receiving the credit to which it is entitled, the premium payee
may (1) reduce the deposits of federal employment taxes, including withheld taxes, that
it would otherwise be required to deposit, up to the amount of the anticipated credit, and
(2) request an advance of the amount of the anticipated credit that exceeds the federal
employment tax deposits available for reduction by filing Form 7200, Advance Payment
of Employer Credits Due to COVID-19. See Notice 2021-24 for more information
regarding the reduction in deposits for the credit and other employment tax credits.

Example 1: Under the facts in the Example in Q&A-74, the premium payee
should report the credit for April through June 2021 on the Form 941 for the second
quarter of 2021.

Example 2: Same facts as in the Example in Q&A-74, except that the premium
payee receives a COBRA election from an Assistance Eligible Individual on July 17,
2021, and the individual elects COBRA continuation coverage as of June 1, 2021. The
premium payee becomes entitled to a corresponding credit as of July 17, 2021, for the
premiums not paid by the Assistance Eligible Individual for the periods of coverage of
(1) June 1 through June 30, 2021, and (2) July 1 through July 31, 2021. The premium
payee should report the total credit on the Form 941 for the third quarter of 2021,
including the credit for the periods of coverage from June 1, 2021 through June 30,
2021.

Q-76. When may a premium payee reduce its deposits of federal employment
taxes and, if applicable, file Form 7200 to request an advance of the anticipated
premium assistance credit that exceeds the federal employment tax deposits available
for reduction for a quarter?

A-76. A premium payee may reduce its deposits of federal employment taxes in
anticipation of the credit to which the premium payee has become entitled with regard to
a period of coverage as of the date the premium payee is entitled to the credit as
described in Q&A-74. If the anticipated credit exceeds the federal employment tax
deposits available for reduction, the premium payee may file Form 7200 to request an
advance payment of the credit. The Form 7200 may be filed after the end of the payroll
period in which the premium payee became entitled to the credit.

Deposits may not be reduced, and advances may not be requested, for a credit
for a period of coverage that has not begun. Form 7200 must be filed before the earlier
of (1) the day the employment tax return for the quarter in which the premium payee is
entitled to the credit is filed, or (2) the last day of the month following that quarter. The
premium payee entitled to the credit should also report any advance payments received
in anticipation of the credit for the quarter on the employment tax return.

Example: Same facts as in the Example in Q&A-74. The premium payee may
reduce its federal employment tax deposits as of June 17, 2021, the date the
Assistance Eligible Individual elected COBRA continuation coverage, in anticipation of
the credit to which the premium payee has become entitled. However, if the credit
exceeds the available reduction in deposits, the premium payee may file Form 7200 to
request an advance for the remaining credit after the end of the semi-monthly payroll
period in which the premium payee became entitled to the credit. Thus, because the
Assistance Eligible Individual elected COBRA continuation coverage on June 17, 2021,
the premium payee may seek an advance beginning on July 1, 2021, the day after the
end of the payroll period of June 16 through June 30, 2021.

Assuming the Assistance Eligible Individual did not notify the premium payee that
the Assistance Eligible Individual is no longer eligible for COBRA continuation coverage
(and the premium payee did not otherwise become aware of the Assistance Eligible
Individual’s ineligibility), the premium payee becomes entitled to an additional credit as
of July 1, 2021, for the premiums not paid by the Assistance Eligible Individual for the
period of coverage of July 1 through July 30, 2021. The premium payee may reduce its
federal employment deposits as of July 1, 2021, in anticipation of the credit to which the
premium payee has become entitled. If the anticipated credit exceeds the federal
employment tax deposits available for reduction, the premium payee may file Form
7200 to request an advance for the remaining credit. However, because the semi-
monthly payroll period in which the premium payee becomes entitled to the credit does
not end until July 15, the premium payee may not seek an advance for the credit until
July 16, 2021, even though it may reduce deposits on July 1, 2021, the day the
premium payee is entitled to the credit.

Q-77. How is the premium assistance credit claimed if the premium payee does
not have any employment tax liability, for example, in the case of a multiemployer plan
with no employees?

A-77. If the premium payee entitled to claim the credit does not have any
employment tax liability, the premium payee should claim the credit on the Form 941 for
the quarter in which the premium payee becomes entitled to the credit. The premium
payee entitled to the credit should also report any advance payments received in
anticipation of the credit on the same Form 941. The premium payee should enter zero
on all remaining non-applicable lines so that the overpayment amount on the Form 941
is the amount of the credit reduced by any advance payment received.

Q-78. If an Assistance Eligible Individual receiving COBRA premium assistance
fails to provide notice of the individual’s eligibility for coverage under any other
disqualifying group health plan or Medicare and continues receiving COBRA premium
assistance, is the premium payee required to refund to the IRS the premium assistance
credit arising from the period after the individual’s eligibility for COBRA premium
assistance ended due to eligibility for the other coverage?

A-78. No. If an Assistance Eligible Individual fails to provide notice that the

individual is no longer eligible for the COBRA premium assistance due to eligibility for
other disqualifying group health plan coverage or Medicare, the premium payee is still
entitled to the credit received for that period of ineligibility, unless the premium payee
knew of the individual’s eligibility for the other coverage. If the premium payee learns
that the individual is eligible for other coverage (and thus of the individual’s ineligibility
for COBRA premium assistance), the premium payee is not entitled to the credit from
that point forward.

Q-79. Is the premium assistance credit included in gross income?

A-79. Yes. Under § 6432(e), the gross income of any premium payee allowed a
credit is increased by the amount of the credit for the taxable year which includes the
last day of any quarter with respect to which the credit is allowed.

Q-80. May a premium payee claim the premium assistance credit with respect to
amounts that are taken into account as qualified wages under § 2301 of the CARES Act
or § 3134 of the Code, or as qualified health plan expenses under §§ 7001(d) or
7003(d) of the FFCRA or §§ 3131 or 3132 of the Code?

A-80. No. Under § 6432(e), a premium payee may not claim a double benefit
with respect to these amounts.

Q-81. May a premium payee that uses a third-party payer to report and pay
employment taxes to the IRS receive the premium assistance credit?

A-81. Yes. The premium payee is entitled to the credit, regardless of whether it
uses a third-party payer (such as a reporting agent, payroll service provider,
professional employer organization (PEO), certified professional employer organization
(CPEO), or § 3504 agent) to report and pay its federal employment taxes. Thus, unless
the third-party payer is treated as the premium payee for purposes of the credit in
accordance with Q&A-82, the third-party payer is not entitled to the credit, regardless of
whether the third party is considered an “employer” for other purposes of the Code.
However, the third-party payer may report the credit on behalf of a client that is the
premium payee with respect to any federal employment taxes it reports and pays on the
premium payee’s behalf. Different rules apply depending on the type of third-party payer
the premium payee uses, as follows.

If a premium payee uses a reporting agent to file its federal employment tax
returns, the reporting agent will need to reflect the credit on the federal employment tax
returns it files on behalf of the premium payee. If a premium payee uses a CPEO or a
§ 3504 agent that received its designation as an agent by submitting Form 2678,
Employer/Payer Appointment of Agent, to report its federal employment taxes on an
aggregate Form 941, the CPEO or § 3504 agent will report the credit on its aggregate
Form 941 and Schedule R, Allocation Schedule for Aggregate Form 941 Filers.

If a premium payee uses a non-certified PEO or other third-party payer (other

than a CPEO or § 3504 agent that submitted Form 2678) that reports and pays the
premium payee’s federal employment taxes under the third-party payer’s Employer
Identification Number (EIN), the PEO or other third-party payer will need to report the
credit on an aggregate Form 941 and separately report the credit allocable to the
premium payees for which it is filing the aggregate Form 941 on an accompanying
Schedule R.

A premium payee that uses a third-party payer to report and pay employment
taxes to the IRS must nonetheless submit its own Form 7200 to request any advance
payment of the credit. The premium payee will need to provide a copy of the Form 7200
to the CPEO, § 3504 agent, or other third-party payer that reports and pays the
premium payee’s federal employment taxes under the third-party payer’s EIN, so the
third-party payer can properly report the credit on the employment tax return.

Q-82. May a third-party payer (such as a PEO, CPEO, or § 3504 agent) be
treated as a premium payee for purposes of claiming the premium assistance credit?

A-82. Yes, but only under certain circumstances. A third-party payer is treated
as the premium payee for purposes of the credit if the third-party payer: (i) maintains the
group health plan, (ii) is considered the sponsor of the group health plan and is subject
to the applicable DOL COBRA guidance, including providing the COBRA election
notices to qualified beneficiaries , and (iii) would have received the COBRA premium
payments directly from the Assistance Eligible Individuals were it not for the COBRA
premium assistance (the TPP Plan Administrator). In this case, the third-party payer’s
client is not treated as a premium payee and is, therefore, not eligible for the credit.
However, in circumstances in which a third-party payer files an aggregate employment
tax return to report and pay employment taxes for individuals who are common law
employees of the third-party payer’s clients, and the conditions set forth in (i) through
(iii) above are not satisfied, the third-party payer is not treated as the premium payee
and may claim the credit only on behalf of its clients (See Q&A-81).

As the premium payee, the TPP Plan Administrator claims the credit on the
applicable lines on Form 941 and, if the TPP Plan Administrator otherwise has to
complete Schedule R, the TPP Plan Administrator would report the credit that it is
claiming in that capacity on line 8 of the Schedule R, rather than separately with respect
to each client for which it was acting as TPP Plan Administrator. (If the third-party payer
was not a TPP Plan Administrator for all of its clients, the third-party payer may also
claim the credit on behalf of its clients that are premium payees, but would be required
to separately report the credit with respect to each of those premium payee clients on
Schedule R.)

TPP Plan Administrators may reduce the deposits of federal employment taxes
relating to their own employees (that is, those employees for whom they are filing as the
common law employer rather than as a third-party payer) in anticipation of the credit in
accordance with the procedures described in Q&A-76. If the anticipated credit exceeds
the available reduction of these deposits, the TPP Plan Administrator may file Form

7200 to request an advance payment of the credit in accordance with the procedures
described in Q&A-76.

The TPP Plan Administrator is subject to § 6432(e) and must, correspondingly,
increase its gross income for the taxable year that includes the last day of any calendar
quarter with respect to which the credit is allowed to the TPP plan administrator. The
TPP Plan Administrator is not allowed a credit with respect to any amount that is taken
into account (by any person, including a client for whom it files returns as a third-party
payer) as qualified wages under § 2301 of the CARES Act or § 3134 of the Code, or as
qualified health plan expenses under §§ 7001(d) or 7003(d) of the FFCRA, or §§ 3131
or 3132 of the Code.

Example: A third-party payer maintains and is the sponsor of a group health plan
on behalf of all of its clients. Due to the nature of the arrangement with each client, the
third-party payer is responsible for providing its clients’ covered employees with the
COBRA election notices, and the third-party payer requires individuals enrolled in
COBRA continuation coverage to pay the COBRA premiums directly to the third-party
payer. Consequently, this third-party payer is treated as a TPP Plan Administrator and
is the premium payee that is entitled to any credit.

The plan’s COBRA period of coverage is a calendar month with COBRA
premium payments due on the first day of each calendar month. The TPP Plan
Administrator pays its own employees that perform services for the TPP Plan
Administrator on a semi-monthly basis, with payroll periods ending on the fifteenth of
the month and the last day of the month, respectively. On June 17, 2021, the TPP Plan
Administrator receives a COBRA election from a client’s potential Assistance Eligible
Individual who elects COBRA continuation coverage as of April 1, 2021. The TPP Plan
Administrator is entitled to a credit as of June 17, 2021, for the premiums not paid by
the Assistance Eligible Individual for the periods of coverage of April 1 through April 30,
2021, May 1 through May 31, 2021, and June 1 through June 31, 2021. Assuming the
Assistance Eligible Individual does not notify the TPP Plan Administrator that the
individual is no longer eligible for COBRA premium assistance (and the TPP Plan
Administrator does not otherwise become aware that the Assistance Eligible Individual
is ineligible), the TPP Plan Administrator becomes entitled to the credit as of July 1,
2021, for the premiums not paid by the Assistance Eligible Individual for the period of
coverage of July 1 through July 30, 2021. (Assuming the facts continue as stated, the
TPP Plan Administrator would be entitled to the credit on (i) August 1, 2021, for the
period of coverage of August 1 through August 31, 2021, and (ii) September 1, 2021, for
the period of coverage of September 1 through September 30, 2021.)

Q-83. What information must a third-party payer obtain from its clients that are
premium payees to claim the premium assistance credit on their behalf?

A-83. If a third-party payer (such as a CPEO, PEO, or other § 3504 agent) is
claiming the credit on behalf of a client that is a premium payee, it must obtain from the
premium payee any information that would have been necessary for the premium payee

to accurately claim the credit on its own behalf.

Q-84. Must a premium payee or a third-party payer claiming the premium
assistance credit on behalf of a premium payee maintain records to substantiate
eligibility for the credit?

A-84. Yes. Records substantiating the premium payee’s eligibility for the credit
must be maintained, either by the third-party payer or the premium payee. A premium
payee, or a third-party payer that is claiming the credit on behalf of a client that is a
premium payee, must, at the IRS’s request, provide to the IRS records that substantiate
eligibility for the credit, including documentation demonstrating that individuals were
eligible for the COBRA premium assistance. The premium payee and the third-party
payer will be liable for employment taxes that are due as a result of any improper claim
of premium assistance credits in accordance with their liability under the Code and
applicable regulations for the employment taxes reported on the federal employment tax
return filed by the third-party payer on which the credits were claimed.

Q-85. If an Assistance Eligible Individual pays premiums for which the individual
should have received COBRA premium assistance under § 9501(a)(1)(A), and the
premium payee reimburses the Assistance Eligible Individual for that amount, when is
the premium payee entitled to the premium assistance credit with respect to the
reimbursement?

A-85. The premium payee is entitled to the credit on the date the premium
payee reimburses the Assistance Eligible Individual for the premium amounts for which
the individual should have received COBRA premium assistance.

Q-86. If a third party (such as a charity) paid premium charges on behalf of an
Assistance Eligible Individual for which the individual should have received COBRA
premium assistance, should the premium payee reimburse the third party or the
Assistance Eligible Individual for the premium amounts for which the individual should
have received COBRA premium assistance?

A-86. The premium payee is responsible for ensuring that reimbursements are
made and should reimburse the Assistance Eligible Individual, unless the premium
payee is aware that the individual has assigned the right to the reimbursed premium
payments to the third party.

ADDITIONAL ISSUES

The Treasury Department and the IRS are aware of certain additional issues
related to the COBRA premium assistance provisions in the ARP that are not addressed
in this notice, in particular as noted in Q&A-62. The Treasury Department and the IRS
are continuing to consider these issues and the possibility of issuing guidance with
respect to them.

DRAFTING INFORMATION

The principal author of this notice is Jason Sandoval of the Office of Associate
Chief Counsel (Employee Benefits, Exempt Organizations, and Employment Taxes),
and other Treasury Department and IRS officials participated in its development. For
further information on the provisions of this notice, contact Jason Sandoval at (202)
317-5500 (not a toll-free number). For further information on topics addressed in the
section of this notice titled Claiming the COBRA Premium Assistance Credit, contact
Mikhail Zhidkov at (202) 317-4774 (not a toll-free number).

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