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September 1, 2021

TAS Tax Tip: Answers to your questions about premium assistance for COBRA benefits

Answered questions about premium assistance for COBRA Benefits

Earlier this year, the IRS issued Notice 2021-31, Premium Assistance for COBRA Benefits, outlining the temporary premium assistance included in Section 9501 of the American Rescue Plan of 2021. This section provides for a temporary 100 percent reduction in the premium otherwise payable by certain individuals who elect Consolidated Omnibus Budget reconciliation Act of 1985 (COBRA) continuation coverage due to a loss of coverage because of a reduction in hours or an involuntary termination of employment. The temporary premium assistance is also available to individuals enrolled in continuation health coverage under State programs that provide for comparable coverage.

Notice 2021-31 includes many questions and answers about this premium assistance for (COBRA) continuation coverage, including information about calculating the credit, eligibility, and the premium assistance period.

The IRS recently issued Notice 2021-46, Premium Assistance for COBRA Benefits Part II, which provides additional guidance on:

  • The availability of this COBRA premium assistance to individuals who were eligible for, but did not elect, extended coverage;
  • Whether and when premium assistance for vision or dental coverage ends due to eligibility for other health coverage that does not include these benefits;
  • The availability of premium assistance under a State statute for certain groups of employees; and
  • Who may claim the premium assistance tax credit in specific situations.

This premium assistance is available for the first period of coverage beginning on or after April 1, 2021 and generally extends through periods of coverage beginning on or before September 30, 2021.

If you are eligible for COBRA benefits, it’s important that you’re familiar with the provisions of this important legislation. If you receive premium assistance and later become eligible for coverage under any other group health plan or Medicare, you must notify the group health plan that’s providing COBRA continuation coverage or you may be subject to a penalty.

More Premium Assistance for Cobra Benefits Information:

Notice 2021-31, Premium Assistance for COBRA Benefits
Notice 2021-46, Premium Assistance for COBRA Benefits Part II
IR-2021-115, IRS provides guidance on premium assistance and tax credit for continuation health coverage