The American Rescue Plan Act and What it Means for Employers
By Karuna S Brunk
On March 11, 2021, President Biden signed into law the American Rescue Plan Act (“ARPA”). The ARPA extends Pandemic Unemployment Assistance from 50 weeks to 73 weeks through September 6, 2021 and extends Emergency Unemployment Compensation benefits from 24 weeks to 53 weeks; provides an additional $300 per week in weekly unemployment benefits through September 6, 2021; and provides additional funding to the Occupational Safety and Health Administration. Two additional provisions of the ARPA are particularly important for employers.
First, ARPA requires that employers cover 100% of their employees’ cost of continuing group health coverage if the employee is involuntarily terminated and elects COBRA. The government has justified its new requirements by subsidizing the cost for coverage through deductions on quarterly payroll filings.
On April 7, 2021, the U.S. Department of Labor (“DOL”) issued guidance implementing the ARPA:
- The ARPA COBRA premium assistance requirements apply to periods of health coverage on or after April 1, 2021 through September 30, 2021 – that is, if an employee is receiving benefits in that timeframe, the employer is required to pay the premium for such benefits.
- The ARPA COBRA benefits apply to employees who are involuntarily terminated or suffer a reduction in working hours for any qualifying reason. They do not apply to voluntary terminations. Individuals and their dependents are eligible for ARPA COBRA assistance if they either (1) enrolled in COBRA and became eligible prior to April 1, 2021; (2) became eligible for COBRA prior to April 1, 2021 but did not previously elect COBRA when it became eligible to them; (3) elected COBRA prior to April 1, 2021 but let the coverage lapse; or (4) became eligible for COBRA benefits after April 1, 2021 through a qualifying event (involuntary termination).
- Individuals are not eligible for the ARPA COBRA benefits if they are able to receive health insurance coverage through other options, for example, through another employer’s plan, a spouse’s plan, or if they are eligible for Medicare.
- Generally, as noted above, the ARPA COBRA premium assistance extends from April 1, 2021 through September 30, 2021 but ends earlier if the employee becomes eligible for another group health plan or if the employee reaches the end of his maximum COBRA continuation coverage period. If the employee continues COBRA coverage after the ARPA COBRA premium assistance ends, he likely would have to pay the full amount of the premium coverage. Notably, the ARPA does not lengthen the actual COBRA period – COBRA coverage for a covered employee generally lasts a maximum of eighteen (18) months.
- The ARPA imposes new notice requirements on businesses and plan administrators to notify beneficiaries of their rights under the ARPA. The ARPA also requires that group health insurance plans and insurers provide individuals with notice of expiration of benefits. The DOL has released the following model notices:
- For qualified beneficiaries who are currently enrolled in COBRA coverage due to a reduction in hours or involuntary termination, as well as others who are eligible if they had elected or maintained COBRA coverage: Model COBRA Continuation Coverage Election Notice (dol.gov)
- For individuals who have qualifying events occurring from April 1, 2021 through September 30, 2021 – Model COBRA Continuation Coverage Election Notice (dol.gov)
- For smaller employers that are subject to state continuation laws and not to COBRA (federal COBRA only affects companies with 20 or more employees) – Model Alternative Notice of ARP Continuation Coverage Election Notice (dol.gov)
Additionally, the DOL provided a Summary of the COBRA premium Assistance Provisions under the American Rescue Plan Act of 2021 – APPENDIX TO § 2590 (dol.gov). Employers should provide this notice to qualifying individuals along with one of the requisite COBRA notices. The U.S. DOL also provided model notice of expiration of benefits to be provided before premium assistance under the ARPA is about to expire – Notice of Expiration of Period of Premium Assistance (dol.gov)
- According to the DOL rules, an employer could be subject to a penalty of $100 per beneficiary, but not more than $200 per family, for each day that the plan or employer is in violation of the COBRA rules.
Second, the ARPA extends the availability of tax credits to businesses that allow their employees to take paid sick leave or emergency family and medical leave through September 30, 2021. Although the ARPA adopts much of the leave language of the Families First Coronavirus Response Act (“FFCRA”), the ARPA does not require employers to pay employees for COVID-19-related leave. That is – FFCRA paid leave is entirely optional for employers. Under the ARPA, leave credits are renewed as of April 1, 2021. As such, if an employer granted paid leave to an employee in October 2020, for example, it would receive a second set of tax credits if that same employee received COVID-19-related paid leave again in April 2021. Additionally, the ARPA adds two additional qualifications for paid leave – (1) an “employee is seeking or awaiting the results of a diagnostic test for, or a medical diagnosis of COVID-19 and such employee has been exposed to COVID-19 or the employee’s employer has requested such test or diagnosis” and (2) “the employee is obtaining immunization related to COVID-19 or recovering from any injury, disability, illness, or condition related to such immunization.”
Much like previous federal government efforts to respond to the COVID-19 health crisis, the ARPA is complicated. We recommend that employers contact a skilled and experienced employment attorney to proactively deal with the government’s “red tape.”