Benefit Plan Impacts in the American Rescue Plan Act of 2021
The American Rescue Plan Act of 2021 (ARPA), signed by President Biden on March 11, 2021, provided a third round of COVID-related direct payments. Additionally, the ARPA contains several benefits-related provisions that will impact your employee benefits plan.
100% COBRA Premium Subsidy and Expanded COBRA Enrollment Options
Individuals who lost employer-sponsored health coverage can now maintain their coverage under COBRA1 at no cost, thanks to a provision in the law which establishes a 100% subsidy for COBRA premiums from April 1, 2021 to September 30, 2021.
Employees with a qualifying COBRA event who have lost or lose their coverage involuntarily, either by termination or a reduction in hours, are eligible for the subsidy. The termination or reduction in hours does not have to be related to the pandemic but cannot have been voluntary or due to gross misconduct. Family members and other qualified beneficiaries may also be entitled to the subsidy if they qualify as an assistance-eligible individual under these expanded rules.
The subsidy and expanded election rules apply to all group health plans subject to COBRA as well as to governmental plans subject to the Public Health Service Act (PHSA). However, this provision does not apply to Healthcare Flexible Spending Accounts (HCFSAs).
This provision creates an additional notice requirement: anyone whose period of COBRA coverage includes any of the months from April to September 2021 must be notified that this premium subsidy is available and must be notified when it is about to expire. This includes employees who did not elect COBRA coverage when it was initially offered, or who elected coverage but discontinued it, as long as they are still within their maximum coverage period during any part of the subsidized timeframe. The special notice must be sent to eligible individuals no later than May 31, 2021 (60 days after the date the subsidy goes into effect). Model notices have recently been published by the federal agencies so you should begin plans to implement the new notice requirements immediately.
Dependent Care Contribution Limits Increased
For 2021, employers may allow employees with Dependent Care Accounts (DCAs) to contribute up to $10,500 (for married employees filing jointly) or $5,250 (for single employees and married employees who file separately). This increase is more than double the standard annual limits of $5,000 and $2,500.
The increased election amount is optional, and employers will need to amend their Section 125 Plan if they choose to allow the provision. American Fidelity has contacted employers for whom we administer Section 125 Plans. If you have not received communication and would like to adopt this provision, please contact us as soon as possible.
Extension of Tax Credits to Employers Voluntarily Providing Paid FFCRA Leave
Finally, while ARPA does not require employers to provide additional paid sick and family leave under the Families First Coronavirus Response Act (FFCRA), it does extend FFCRA tax credits for voluntarily providing paid time off for COVID-19 related reasons.
American Fidelity continues to monitor new legislation and keep you informed. To stay up to date, check out all our COVID-19 FAQs.
This blog is up to date as of April 2021 and has not been updated for changes in the law, administration or current events.