DOL & IRS ARPA FAQs Released

On March 11, 2021, President Biden signed the American Rescue Plan Act of 2021 (ARPA) into law. It provides a 100% subsidy of applicable COBRA premiums for eligible beneficiaries and their dependents, for the time period beginning April 1, 2021 and ending no later than September 30, 2021.  

COBRA Subsidies

On April 7, 2021, the Department of Labor (DOL) issued guidance related to COBRA subsidies, consisting of Frequently Asked Questions (FAQs) surrounding ARPA premium assistance for health insurance continuation coverage under COBRA and similar state mini-COBRA programs.

The DOL’s guidance on COBRA subsidies clarifies:

  • New plan notice requirements for the subsidy;
  • The applicability of the ARPA election extension; and
  • That extended deadline relief under earlier federal guidance does not apply to the ARPA’s COBRA notice and election timeframes.

The FAQs explain that the prior COBRA deadline relief does in fact apply to an individual’s eligibility to elect the COBRA subsidy based on an earlier qualifying event (i.e. birth or adoption of a child, death of a spouse, or change in marital status). Keep in mind, failing to satisfy the ARPA COBRA requirements may result in a tax of $100 per qualified beneficiary per day to employers and plans.

Premium Tax Credit

On April 9, 2021, the Internal Revenue Service (IRS) released a fact sheet containing FAQ’s addressing changes for taxpayers who received advance payments of the 2020 premium tax credit (PTC) due to the American Rescue Plan Act (ARPA). Specifically announcing that, for tax year 2020, taxpayers with excess advance payments of the Premium Tax Credit (APTC) for 2020 are not required to file Form 8962, to reconcile their APTC with the amount of PTC they are entitled to claim for 2020.

The PTC helps pay for health insurance coverage bought from the Marketplace. When a taxpayer or a family member of the taxpayer applies for coverage, the Marketplace estimates the amount of the PTC the taxpayer may be able to claim for the year of coverage. This estimate is based on information the taxpayer provides about family size and projected household income.

Taxpayers should not:

  • Report an excess APTC repayment on their 2020 Form 1040 or Form 1040-SR, Schedule 2, Line 2; or
  • File Form 8962.

The IRS developed this fact sheet to explain what taxpayers need to know about claiming a net PTC and what to do if they have excess PTC for tax year 2020. With that said, if the taxpayer’s PTC calculated on the return is more than the APTC paid on the taxpayer’s behalf during the year, the difference is a net PTC.

It is essential to understand how recent legislative changes for the PTC affect individuals, families and their 2020 tax return.

For additional information surrounding ARPA Premium Tax Credits, click here.

Should you have any questions, please don’t hesitate to contact Creative Benefits, Inc. at 866-306-0200 or solutions@creativebenefitsinc.com.