The American Rescue Plan Act of 2021 and COBRA

Employment/Labor GroupEmployment/Labor Group

The American Rescue Plan Act of 2021 (the Act) became effective on March 11, 2021. It provides six months, from April 1, 2021 – September 30, 2021, of free health care coverage under the Consolidated Omnibus Budget Reconciliation Act (COBRA) to laid off employees and their covered dependents.

The Act applies to employees who have been laid off, i.e., involuntary termination or involuntary reduction in hours, over the past year and who would have been covered by COBRA at the time of their termination. Typically, upon termination, employees have 60 days from receiving notice of COBRA eligibility to sign up for the benefit. Under the Act, eligible employees are those who are already enrolled in COBRA, did not elect COBRA at the time it was available to them, or elected COBRA at the time it was available to them but let the coverage lapse. Coverage applies to individuals whose COBRA coverage expires, or would have expired had they elected it or did not allow it to lapse, during or after April 1, 2021 – September 30, 2021. This means that individuals are not receiving an extension to their 18-month COBRA period under the Act—generally, it is applicable to employees who were eligible in November 2019 or later. Notably, if a COBRA period starts after April 1, 2021 or ends before September 30, 2021, this subsidy will be provided for fewer than six months.

Under the Act, Employers will receive reimbursement for the premium amounts from the federal government as tax credits. Employees who qualify may sign up through their previous employer.

Individuals who begin working for a new employer and receive health insurance coverage through that new employer or those who receive Medicare, prior to the September 30, 2021 provision end date, will lose coverage under the Act.

Employers are required to send former employees COBRA notices of eligibility. These notices will provide employees with a notice of their right to the new subsidy, when their subsidy would end, an enrollment window, contact information for additional information, and the individual’s obligation to notify the plan when he or she becomes eligible for healthcare through a new employer or Medicare. The notices will need to be distributed by employers within 60 days of April 1, 2021. The Department of Labor will provide model notices by April 10, 2021.

For more information, visit https://www.lerchearly.com/services/employment-labor.

Families First Coronavirus Response Act Tax Credit Extension in 2021

Employment/Labor GroupEmployment/Labor Group

The Families First Coronavirus Response Act (FFCRA) sunsetted on December 31, 2020, but some provisions remain active.

On Sunday, December 27, 2020, former President Donald Trump signed a bipartisan pandemic relief bill into law. Because the leave provisions of the FFCRA were not extended employers were no longer required to provide leave under the FFCRA in 2021.

However, as part of this relief package the tax credit for FFCRA leave, which reimburses employers for FFCRA leave taken by employees, was extended through March 31, 2021. Therefore employers who voluntarily choose to provide employees with FFCRA leave may do so until March 31, 2021 and receive tax credit for the leave. Of course, employers may instead choose to adopt their own policies to grant paid or unpaid leave for COVID-related purposes or simply allow employees to use their existing leave.

If employers do choose to provide FFCRA through March 31, 2021 they should be aware that employees are not granted FFCRA leave in addition to what they received in 2020. Thus if an employee has exhausted 80 hours of paid sick leave and 12 weeks of expanded family medical leave in 2020 they will not receive additional leave in 2021. Moreover, there are no changes to eligibility, purposes of leave, caps on usage, or documentation requirements.

Lastly, state or local laws may impose additional requirements for COVID-19 related leave and employers are advised to ensure that they act in compliance with any applicable laws.

For more information, contact one of our employment attorneys.