TSCPA News

IRS Clarifies COBRA Premium Assistance Credit in New Guidance

July 27, 2021

The IRS recently released Notice 2021-46, providing additional guidance to employers, health insurers and health plan administrators on how to provide laid-off employees temporary assistance paying for COBRA continuation coverage and claim a refundable tax credit. The new notice supplements the 86 questions and answers released in Notice 2021-31 in May.

Notice 2021-46 adds 11 more questions and answers on the following issues:

  • Eligibility for COBRA premium assistance for extended coverage periods
  • What happens at the end of the COBRA premium assistance period for individuals who elected dental and vision coverage
  • Whether state continuation coverage programs provide comparable coverage when they cover a subset of state residents
  • Clarification on the entity that may claim the COBRA premium assistance credit

The premium assistance and credit are available under the American Rescue Plan Act (ARPA), P.L. 117-2, which provides for a temporary 100 percent reduction in the premium that individuals must pay when they elect COBRA continuation health care coverage following a reduction in hours or an involuntary termination of employment. The employer, insurer or multiemployer plan to which the COBRA continuation premiums are payable may then claim a refundable tax credit against its share of Medicare taxes.

The premium assistance is available for periods of COBRA coverage beginning after April 1, 2021, but not for periods beginning after Sept. 30, 2021.