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March 15, 2021

American Rescue Plan Act of 2021 (ARPA)

Donna Wilkinson
Donna Wilkinson
General Counsel

On March 11, 2021, President Joe Biden signed into law the American Rescue Plan Act of 2021 (ARPA). The legislation goes into effect April 1, 2021 and contains provisions for a COBRA subsidy and an increase to the annual dependent care FSA contribution limit for 2021.

COBRA Premium Subsidy 

The ARPA includes a 100% COBRA premium subsidy for eligible individuals and their family members. Details about the subsidy and criteria are included below.

Action Items for Ameriflex Clients

March 29, 2021 – April 30, 2021: Review COBRA Records – Employer Responsibility

  1. Ameriflex is unable to determine if a previously-terminated employee was terminated voluntarily or involuntarily without the employer providing and confirming such information. As the custodian of employment records, the employer is responsible for reporting this information accurately; therefore, it is crucial employers review their COBRA records to ensure those employees who were terminated beginning November 1, 2019 to present were marked correctly as involuntary or voluntary.
    1. ​​​​​R​​​eview COBRA records and confirm that individuals who were terminated involuntarily or had a reduction in hours are marked as Termination-Involuntary or Reduction in Hours under Event Type. View instructions for this here.
    2. If there are any changes that need to be made to an individual’s status in the COBRA system, contact your Client Relationship Team. You can access their contact information in the Ameriflex Employer Portal.
    3. To ensure all individuals who are eligible for the subsidy receive their notices in the required timeframe, please notify your Client Relationship Team of any changes by April 30.

Action Items for Ameriflex and Department of Labor

April 10, 2021 – Department of Labor Responsibility

May 14, 2021* – May 31, 2021 – Ameriflex Responsibility

April, 25, 2021 – Department of Labor Responsibility

May 31, 2021* – September 15, 2021 – Ameriflex Responsibility

Employers will be able to offset the cost of the COBRA subsidy through a payroll tax credit against the Section 3111(b) Medicare tax. The credit will include the entire COBRA premium, including the 2% administrative fee. More information and guidance on the tax credit procedures will be forthcoming as the IRS and DOL work to determine the exact procedure.

Dependent Care FSA Limit Increase

The legislation also includes a voluntary one year increase to the annual dependent care FSA contribution limit. Employers who want to offer the limit increase to their employees must amend their plan documents.

IMPORTANT NOTE for NON-calendar year DCA plans: The total DCA contributions for the calendar year 2021 would need to be monitored by the employer so employees do not contribute more than $10,500 within the 2021 calendar year, even if the plan year overlaps 2021 and 2022. Ameriflex would need to be notified of any contribution changes to the 2022 plan year if the employee has contributed $10,500 for 2021, so employees’ accounts are not overfunded starting 2022 or in 2021. If employers with NON calendar year DCA plans wish to increase the 2021 maximum, employers will strongly want to consider prorated reimbursement limits for expenses incurred during the 2022 portion of the 2021-2022 plan year. The employer will be responsible for ensuring that no employee exceeds the maximum amount for the year as any excess contribution would need to be reported as taxable income. For these reasons, Ameriflex does not recommend NON-calendar year plans adopt this increase since it places additional risk and monitoring by the employer to remain in compliance with the regulations.

We are actively working on the operational procedures to accommodate the ARPA legislative updates and will communicate next steps to our clients and partners soon.

FAQ:

Would the subsidy cover only during the period listed (04/01/2021 to 09/30/2021

Yes, the subsidy will only be for that time period.

What if an individual has a qualified life event in the middle (Example: 07/01/2021): 

They would only have a subsidy for the remaining period (07/01/2021 to 09/30/2021)

Is the COBRA subsidy available to people who declined COBRA before? For example, if I was eligible for COBRA in August of last year and declined, will I get a new notice with the option to re-enroll + the ability to receive the subsidy?

Yes, if a person initially declined COBRA but was still within their election period, they could change their mind and choose to now elect coverage effective 4/1/2021 with the ability to receive the subsidy.

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