IRS Releases Notice 2021-31
May 19, 2021 | COBRA COVID-19 Quick Alerts

IRS Issues Additional ARPA Guidance and FAQs
It’s finally here!
On May 18, 2021, the Internal Revenue Service (IRS) released Notice 2021-31. The notice provides much needed information regarding the calculation of the ARPA subsidy, the eligibility of individuals, the premium assistance period, and other information vital to employers, plan administrators, and insurers to understand the credit.
Notice 2021-31 Highlights
- Contrary to the 2009 ARRA guidance, those enrolled in COBRA on 4/1/21 will be sent an Extended Election Notice if their original qualifying event was a covered employee’s involuntary termination of employment or reduction in hours of employment, even if they are current enrolled pursuant to a 2nd qualifying event extension (e.g., divorce or child aging out during the original 18-month period) or a disability extension.
- Consistent with #1, those receiving an additional 18-month state law required extension (e.g., New York) when Federal COBRA ends are also eligible for the subsidy if that state extension runs into the subsidy period. Basically, if you are still receiving continuation coverage on 4/1/21 and your original qualifying event was an involuntary termination/reduction in hours, you can qualify for the subsidy.
- The guidance confirms the need for affirmative attestation (Request for Treatment as an Assistance Eligible Individual Form) by the potential Assistance Eligible Individual (AEI) that they qualify for the subsidy, which is what OCA strongly recommended all along. The guidance doesn’t mandate it, but it makes it virtually impossible for the employer to substantiate the credit because they would have to provide documentation proving that the AEI wasn’t eligible for other coverage, which an employer wouldn’t be able to provide.
- Involuntary termination definitions were largely similar to ARRA; however, they added a twist to the terminations of those out on leave/disability that did not exist with ARRA. It is only involuntary if the employer had a reasonable expectation that the AEI would return to work before the employer terminated them. We are not sure that is the case with respect to a termination of someone who fails to return from leave and/or disability. OCA and our legal team are discussing this talking point and we will follow up once we make our determination.
- The guidance didn’t address this, but OCA and its legal team did confirm with the IRS that the 2nd election opportunity is available to any Qualified Beneficiary (QB) whose original qualifying event was an involuntary termination of employment/reduction of hours even if they aren’t eligible to receive a subsidy because they are eligible for other coverage/Medicare. While we don’t see many individuals electing this, what it means is someone who’s eligible for other group coverage can still prospectively elect COBRA as of 4/1/21. They essentially are getting another chance at COBRA but responsible for paying premium.
- Eligibility for other group health coverage is defined to mean that if you are unable to get into the plan despite meeting the otherwise eligibility requirements because you failed to take advantage of an enrollment opportunity BEFORE 4/1/21 and now the plan will not let you in in the absence of a Section 125 premium only plan or HIPAA special enrollment event. The DOL’s model notice is misguided on this point because it says that eligibility is determined without regard to whether you made an election or not (except during a waiting period).
OCA will be providing further communications once we have had the opportunity to fully digest the newly released ARPA guidance.