COBRA premium assistance credit clarified further

By Dave Strausfeld, J.D.

In 11 questions and answers, the IRS on Monday gave additional guidance to employers, health insurers, and plan administrators on how to provide laid-off employees temporary assistance paying for COBRA continuation coverage and claim a corresponding tax credit (Notice 2021-46).

In May, the Service issued Notice 2021-31, containing a set of 86 questions and answers concerning premium assistance for COBRA health care coverage. Monday’s notice supplements those 86 Q&As with 11 more.

The premium assistance and credit are available under the American Rescue Plan Act (ARPA), P.L. 117-2, enacted in March, which provided for a temporary 100% reduction in the premium that individuals have to pay when they elect COBRA continuation health care coverage following a reduction in hours or an involuntary termination of employment. Notably, ARPA also temporarily extended the COBRA election period. Under ARPA, the employer, insurer, or multiemployer plan to which the COBRA continuation premiums are payable then claims a refundable tax credit against its share of Medicare taxes.

The premium assistance is available for periods of COBRA coverage beginning after April 1, 2021, but not for periods beginning after Sept. 30, 2021.

The 11 questions and answers in Monday’s notice pertain to the following aspects of the premium assistance and credit:

  • Eligibility for COBRA premium assistance for extended coverage periods;
  • What happens at the end of the COBRA premium assistance period for individuals who elected dental and vision coverage;
  • Whether state continuation coverage programs provide comparable coverage when they cover a subset of state residents; and
  • Additional clarification on the entity that may claim the COBRA premium assistance credit.

For more information about the temporary premium assistance and credit, see a May 19 news story.

Dave Strausfeld, J.D., (David.Strausfeld@aicpa-cima.com) is a JofA senior editor.

SPONSORED REPORT

Get your clients ready for tax season

Upon its enactment in March, the American Rescue Plan Act (ARPA) introduced many new tax changes, some of which retroactively affected 2020 returns. Making the right moves now can help you mitigate any surprises heading into 2022.

100th ANNIVERSARY

Black CPA Centennial, 1921–2021

With 2021 marking the 100th anniversary of the first Black licensed CPA in the United States, a yearlong campaign kicked off to recognize the nation’s Black CPAs and encourage greater progress in diversity, inclusion, and equity in the CPA profession.