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Admin America COBRA Premium Assistance Administration Update

We wanted to provide you with a brief update on our current plan for assisting clients with the compliance obligations imposed by the new COBRA Premium Assistance benefit provided through the American Rescue Plan Act of 2021 (ARPA).   More general information about this new benefit is available from a previous blog post we published online here.  Alternatively, you can access a recording of a recent webinar we presented about the Premium Assistance benefit here.

This post contains information about our plans to provide the notices required under the new law to individuals who could qualify as Assistance Eligible Individuals (AEIs).  There will be supplemental fees for this service so this message provides information for groups who may wish to opt-out of our notice service and provide the notices on their own.  This post will also address Admin America’s plans to verify AEI status of applicants with their former employers.  Lastly, this post will address our current plans to provide information regarding the applicable premium amounts that employers will then be able to claim as credits against their periodic payroll tax deposits with the IRS. 

The Required Notices

Under the new law, employers subject to COBRA are required to provide written notice to individuals who may qualify for the COBRA Premium Assistance.  These individuals include any COBRA Qualified Beneficiaries who experienced an involuntary loss of coverage due to a termination of employment or reduction of hours effective any time on or after November 1, 2019.   For certain groups, this will include terminations that occurred during October 2019 as well.  The required notices must be provided to the designated individuals no later than May 31, 2021. Admin America intends to begin providing these notices on behalf of our COBRA clients during the last two weeks of May. Based on guidance from our mail fulfillment partner, we expect take almost two weeks but that all of the required notices will be postmarked and mailed prior to the May 31 deadline.  

Our intention is to provide the notice to all Qualified Beneficiaries who experienced a termination of employment or reduction of hours related loss of coverage during the applicable period regardless of whether the event may have been previously labeled as voluntary or involuntary.  Because the non-compliance penalty for failure to send the required notice is so high ($100 per day per letter), we are choosing to err on the side of caution with regards to notice delivery.  We have observed too many instances recently of employers mislabeling involuntary terminations as voluntary and we want to avoid employers being assessed penalties for failure to send a notice to an individual whose termination is mislabeled in that way.

 Admin America will invoice clients $2.00 per notice for providing the additional notices required under ARPA for any Qualified Beneficiary to whom Admin America has previously provided a COBRA Election Letter.   Admin America will not charge a per notice fee for Qualified Beneficiaries who are provided the required notice as part of their original COBRA Election Letter.  This generally will apply to Qualified Beneficiaries whose Qualifying Event occurred after President Biden’s signing of ARPA on March 11.   Admin America has intentionally delayed sending those individual’s COBRA Election Letters to avoid unnecessary duplicate letters and the corresponding expense for our clients.  Clients wishing to provide the required notices on their own (and avoid the corresponding $2.00 per notice fee) may complete an online opt-out form here.  Opt-out forms must be completed no later than Wednesday May 5.  

Important note for clients who do not opt-out of Admin America’s provision of notices to their Qualified Beneficiaries.  Clients who commenced monthly COBRA administration services with Admin America on or before October 1, 2019 do not need to take any action for notices to be delivered to all applicable Qualified Beneficiaries.  Admin America will have all of the necessary historical data to provide the required notice.  The only exception to this would be if the client has any address updates that it wishes to provide to Admin America.  Address updates for a specific Qualified Beneficiary can be submitted directly through the Employer Portal of Admin America’s COBRA software.  Alternatively, clients who commenced monthly COBRA administration services after November 1, 2019 may have Qualified Beneficiaries who require supplemental notices but for whom Admin America does not have historical data needed to provide the notices.  Those clients may request a data template to provide Admin America with information about any Qualified Beneficiaries who experienced Qualifying Events prior to Admin America’s commencement of monthly administrative services.  Admin America will charge $6.00 per notice for these individuals.  Clients may request the data template for this purpose by completing the online form found here.

Assistance Eligible Employee Verification

Qualified Beneficiaries will have 60 days from the date their notice is mailed to elect coverage and verify that they qualify as an AEI.  Their notice will provide them with instructions for completing an online eligibility form.  An alternative paper application process will also be provided for any Qualified Beneficiaries without computer access.  Once a Qualified Beneficiary completes a COBRA election application, the individual’s former employer will receive an e-mail notification.  A representative of the employer will be asked to verify the involuntary nature of the Qualified Beneficiary’s employment termination (or reduction of hours).  The verification (or denial) will be made through a simple internet form.  If the employer verifies that the loss of coverage was involuntary, Admin America will process the COBRA election.  Alternatively, if the employer indicates that the Qualifying Event was voluntary, Admin America will issue a benefit denial to the Qualified Beneficiary including information about any applicable appeals rights.

COBRA Enrollment and Premium Reporting

For any Qualified Beneficiary that applies and is verified by their former employer as an Assistance Eligible Individual, Admin America will process the applicable coverage reinstatement(s) with the appropriate insurance carriers or plan administrators.  Admin America will also track the applicable premium amounts for the coverages elected by Assistance Eligible Individuals.  Admin America will report these amounts to the applicable employers each month for the duration of the Premium Assistance benefit program (currently scheduled to expire at the end of September 2021.  It is also expected that employers will be able to access this information at any time on demand through the employer portal of Admin America’s COBRA administrative platform.

As part of the reporting process, Admin America will also invoice employers for the allowable 2% COBRA administrative fee.  This amount will be included in the reports sent by Admin America and may be claimed as a payroll tax credit from the IRS along with the actual premium amounts.

We hope this information clarifies any questions you have about Admin America’s administrative plan for the Premium Assistance benefit.  However you may address any additional questions directly to Trey Tompkins via e-mail at trey@adminamerica.com

Thank you for entrusting Admin America with your COBRA compliance administration.  We will continue to work diligently to make this process as simple for you and your employees as possible. 

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Temporary Increase in Annual DCAP Salary Contribution Limit

The American Rescue Plan Act of 2021 signed into law by President Biden on March 11 includes an increase in the annual limit on Dependent Care Flexible Spending Arrangement pre-tax contributions for calendar year 2021.  The limit for this year only has been increased from $5,000 to $10,500 (or $5,250 for married individuals filing separately). This temporary change is optional for employer plan sponsors.  Employers wishing to provide this enhanced benefit opportunity to their Plan Participants must amend their Plans to adopt the increased limit for the 2021 tax year.

This change will be relatively straightforward for calendar year Dependent Care Flexible Spending Arrangements.  Participants will be allowed to increase their annual elections to take advantage of the increased limits for any expenses incurred during 2021.  For non-calendar year plans, the change will be more complicated.  The annual limit on Dependent Care pre-tax payroll contributions has always applied on a calendar year basis for all plans and this temporary change to the annual limit does not change that.  Therefore, non-calendar year plan sponsors that offer this increased limit to their Participants will need to structure the Participant’s payroll contribution schedule so that the additional contributions are all made within 2021 calendar year payrolls.

Employers wishing to amend their plans to take advantage of the increased limits can submit an amendment request to Admin America here.  If you have additional questions about this temporary change to the 2021 Dependent Care FSA limits, you can e-mail Trey Tompkins at trey@adminamerica.com or you can schedule a call with Trey at an available time that is most convenient for you here.

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COBRA Premium Assistance in the New Federal COVID-19 Relief Package

Earlier today President Biden signed the ‘‘American Rescue Plan Act of 2021’’ (ARPA) which contains numerous provisions to aid individuals, businesses and state and local governments impacted by the coronavirus pandemic.  Included among those provisions is funding to pay COBRA premiums for individuals who lost their group health insurance coverage during the pandemic.  

ARPA’s COBRA Premium Assistance will pay 100% of the applicable premium for “Assistance Eligible Individuals (AEIs)” during the months of April 2021 through September 2021.  AEIs are COBRA Qualified Beneficiaries who’s Qualifying Event was an involuntary termination of employment or reduction of hours who are not currently eligible for other group health plan coverage or Medicare.  AEIs can be Qualified Beneficiary who’s original 18 month maximum period of COBRA would have extended into April 2020.  Therefore, AEIs could include individuals who lost coverage due to an involuntary termination of employment or reduction of hours that occurred as long ago as October 2, 2019.    

ARPA requires employers to send a special supplemental COBRA Notice to any potential AEIs with information about the COBRA Premium Assistance no later than May 30, 2021.  The U.S. Department of Labor is tasked with providing Model Notices for this purpose no later than April 10, 2021. 

AEIs who elect COBRA coverage as a result of the COBRA Premium Assistance Notice may start their coverage beginning in April 2021.  ARPA overrides the standard COBRA requirement that requires Qualified Beneficiaries to elect coverage (and pay for it) back to their original loss of coverage date.  ARPA does not extend a Qualified Beneficiary’s maximum period of coverage beyond the 18th month after the original loss of coverage. 

ARPA also requires employer to send a second notice later this summer to AEIs regarding the end of the COBRA Premium Assistance.  Admin America will be able to assist employers with the delivery of both required supplemental notices at the appropriate time.  Admin America will also track AEI COBRA premiums to assist employers with adjusting and paying their insurance carrier invoices and/or claiming the federal tax credit that is available to offset the unpaid COBRA premiums.

To better help employers and their employee benefits advisors understand the details of ARPA’s COBRA Premium Assistance provisions and Admin America’s administrative response, we will be scheduling multiple webinars in the upcoming weeks to review the changes.  Attendees will also have the ability to ask questions.  Online registration for the webinar sessions is available here.  Admin America will be providing additional communications to employers and advisors in the coming weeks as expected regulatory guidance is released and Admin America’s new procedures are finalized.  Any immediate questions may be directed to Trey Tompkins via e-mail at trey@adminamerica.com.