Compliance Alert
American Rescue Plan Act of 2021 (ARPA):
Impact on COBRA Administration & Dependent Care Benefits

The American Rescue Plan Act of 2021 (ARPA) was just signed into law. Below is a brief summary of the items with direct impact on our clients:

COBRA Administration

  • 100% premium subsidy for the time period April 1, 2021 through September 30, 2021 for COBRA Qualified Beneficiaries who lose (or lost) their employer’s group health plan coverage (and/or dental and vision coverage) due to involuntary termination or involuntary reduction in hours. 

  • No other COBRA-qualifying events (voluntary termination of employment, death, divorce, loss of dependent status) qualify for a subsidy.

  • The premium subsidy does not apply to Medical FSAs.

  • The subsidy is not available to COBRA Qualified Beneficiaries who are (or become) eligible for other group health plan coverage or Medicare.

  • Employers will need to adhere to reporting requirements in order to receive refundable payroll tax credits for the amount of subsidized COBRA premiums.

  • Individuals who receive the subsidy are not eligible for the Health Coverage Tax Credit (HCTC).

  • Employers may allow subsidy-eligible COBRA Qualified Beneficiaries to switch to less-expensive coverage.

  • An eligible individual who did not elect COBRA, or who elected but dropped COBRA coverage prior to April 1, may receive the subsidy on a prospective basis, without having to elect and pay for COBRA retroactively for months prior to April 1.

  • Eligible COBRA Qualified Beneficiaries who are still within their original 18-month COBRA coverage period have a 60-day special election period. GDI will prepare and send the required notice as well as update our existing notice to accommodate the new rule. The 60-day time period begins when the notice is mailed. A model notice will be provided by the Department of Labor within 30 days.

  • GDI will notify applicable COBRA Qualified Beneficiaries when the premium subsidy is due to expire, as required by the law.

Additional information will be forthcoming from our COBRA Team.

Dependent Care Benefits

  • The Act increases the 2021 annual Dependent Care FSA maximum from $5,000 to $10,500 for single parents or married individuals filing a joint tax return, and from $2,500 to $5,250 for married individuals filing separate tax returns.

  • Additionally, the Act enhances the 2021 dependent care tax credit. The amount of expenses eligible for the credit increases to $8,000 (from $3,000) for one qualifying individual and $16,000 (from $6,000) for two or more qualifying individuals. The maximum credits would therefore be $4,000 and $8,000.

Client Service Team
Group Dynamic, Inc.
Group Dynamic, Inc. |