The $1.9 trillion American Rescue Plan Act (ARPA) was signed into law this past week. This bill includes a few items regarding employee benefits, of which the following are the most notable:
COBRA Premium Subsidy—
Purchasing health insurance through the Consolidated Omnibus Budget Reconciliation Act (COBRA) is less expensive, temporarily this year.
The stimulus plan will pay 100% of COBRA premiums from April 1 to September 30, 2021.
Your employees will lose eligibility if they qualify for new, employer-provided health insurance with another employer before September 30.
Employees who leave your employment voluntarily are not eligible.
COBRA subsidy does not apply to leaves under the Families First Coronavirus Response Act (FFCRA) because employees can maintain their health insurance during their FFCRA leaves as if they continued to work.
The federal regulatory authorities will provide guidelines in the first two weeks of April.
Employers with 20 or more employees with:
Group plans subject to the federal COBRA rules must pay COBRA premiums between April 1, 2021, through September 30, 2021. They will receive premium reimbursements through a refundable payroll tax credit.
Employers with fewer than 20 workers:
Are typically exempt from the federal COBRA rules. If their state follows the federal rules through its mini-COBRA law, the insurance carrier will pay the premium and later receive reimbursements from the federal government.
Must work with their group health insurance carriers and vendors to administer the new subsidy provision. Although it takes effect on April 1, 2021, employees who were terminated earlier but are still in their COBRA election period are also included.
Dependent Care FSA Exclusion Limit—
Families with children will benefit from a change in the existing tax credit that offsets the cost of care for children under 13 and other dependents.
For 2021, the increased threshold for a married individual filing a joint return is $10,500 in qualified dependent care instead of the previous $5,000.
Employers must adopt this provision for employees to increase their elected funds for their dependent-care FSA, although it is not mandatory for them to do so.
Employer Tax Credit Extension—
The stimulus plan extended the tax credit to employers who offer employees with COVID-19 related paid sick and family leave through September 30, 2021.
We expect more to come as the administration works through the details of implementation.