American Rescue Plan

Dependent Care Assistance

The dependent care assistance amount increases for 2021 from $5,000 to $10,500 effective January 1, 2021.

COBRA Subsidy

• Begins April 1^st and lasts through September 30^th.
• Subsidy is 100% of the COBRA Applicable Premium.
• To receive the subsidy the COBRA event must be an involuntary termination of employment or reduction in hours.
• An individual cannot receive the subsidy if eligible for coverage under another group health plan.
• Qualified beneficiary must provide notice if no longer eligible or face a $250 penalty.
• Individuals and qualified beneficiaries associated with the eligible individual may receive the subsidy.
• A Special Notice to eligible individuals must go out within 60 days from April 1^st.
• Eligible individuals have 60 days to elect coverage after receipt of the Special Notice.
• Notice on the expiration of the subsidy and the right to continue COBRA paying the full premium is also required.
• Employers may allow individuals to change plan options provided the premium for the option is less than current premium.
• Employer is responsible for the subsidy and takes a credit against Medicare payroll tax.

Potential Employer Actions for COBRA Subsidy

• Identify and provide involuntary terminations and reductions in hours going back to October 2019.
• Note that there may be changes to remitting payroll taxes on Form 941.