American Rescue Plan Act

In January, President Biden announced The American Rescue Plan Act (the ARP), also known as the COVID-19 Stimulus Package, in order to deliver immediate relief to families and communities in need. 

Last month, the IRS issued additional guidance on the application of the ARP relating to temporary premium assistance for Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA). 

The notice details how to calculate and claim the tax credit, stating that employers must document an individual’s eligibility. An Assistance Eligible Individual (AEI) is an employee or beneficiary who is eligible for premium assisted continuation coverage under ARP for the period of April 1, 2021, through September 30, 2021. The law states that a beneficiary is an AEI who elects COBRA continuation coverage only in the event of a loss of coverage due to the following circumstances:

  • Reduction in hours (voluntary or involuntary)
  • Involuntary termination of employment, including:
    • Resignations by employees for material location change of worksite or a material reduction in work hours
    • Employees who are offered a severance payment to terminate employment, if that employee were to be terminated regardless
    • Constructive discharge (fact-based determination)

An AEI can be both an employee and a beneficiary (spouse or dependent), so long as loss of health coverage was due to the above circumstances. This means that loss of coverage triggered by a divorce or an aging-out of dependent status will not trigger premium assistance.


Fraudulence Penalty 

Premium assistance is not available for individuals who are or become eligible under any other group health plan or Medicare. If an individual fails to release their eligibility information, they may be subject to a penalty equal to the greater of $250 or 110 percent of the premium assistance falsely acquired after their coverage period. If you are confused about your status or eligibility, contact the professionals at Benchmark Planning Group.  

As we continue to amend the public health and economic crises, the IRS may issue further guidance down the road. Stay up to date with BMPG blogs for the latest in employee benefits and healthcare.