Assistance from Congress to employers and workers continues (specifically through the American Rescue Plan Act – ARPA – signed into law March 21, 2021). The latest mandate and employer assistance to come into play is the temporary COBRA continuation coverage premium assistance to affected workers and a corresponding credit to employers. ARPA mandates that the employer is required to pay 100% of the COBRA premium subsidy for eligible employees and their qualified beneficiaries from April 1, 2021 through September 30, 2021, but also provides a corresponding payroll tax credit reimbursement to the employer on the quarterly 941. This post highlights how PayNorthwest or other professional payroll providers can assist employers in claiming this important credit.
The temporary premium assistance and credit are available under the American Rescue Plan Act (ARPA), P.L. 117-2, which provides for a temporary 100% reduction in COBRA premiums for individuals and their families who elect COBRA continuation coverage due to a loss of group health coverage as a result of a reduction in work hours or involuntary termination of their employment. ARPA also provides an extended COBRA election period. The employer then claims a refundable tax credit against its share of Medicare taxes (Sec. 6432, added by ARPA).
Unfortunately, employers first need to sort through a fairly complicated set of rules around eligibility. In an effort to help employers, the IRS recently released Notice 2021-31 which provides 86 Q&As and helpful examples on how employers can comply with the COBRA subsidy requirements. If this doesn’t fully answer employer questions, qualified and specialize legal or HR counsel will need to be obtained to determine employee eligibility for the premium assistance.
The good news is that ARPA also allows for a COBRA Premium Subsidy for employers by providing a 100% subsidy for the cost of COBRA continuation coverage for eligible employees. If you are a PayNorthwest client and your company is eligible for a credit in 2nd quarter 2021 (for April, May and June), we are prepared to help. PayNorthwest has developed a form for its clients to use so that we can apply the credit to their quarterly 941. For PayNorthwest clients, simply reach out to your dedicated client support representative and they will get you started if you have not yet done so. If you are not yet a PayNorthwest client (we know there are still a few of you out there!), please contact us today to learn how we can help your take advantage of the many programs and credits available to employers as a response to the COVID pandemic as well as how we can help you compete and thrive in today’s competitive labor market and challenging compliance environment.