No the initial information was insufficient, as with any hastily contrived rules.  Fortunately, the IRS issued Notice 2021-31, which clarifies in a brisk 86 questions what everyone has been wondering, but which most of us had surmised.  Highlights are:

  • The new Forms 941 (quarterly wage report, along with Schedule R) and 7200
  • The tax credit taken on the quarterly wage report is against the Medicare amount due
  • Employer may rely on individual attestation that they are not eligible for other coverage
  • Availability of other coverage does not preclude extension if they cannot yet enroll in it
  • Second qualifying events merely continue coverage and thus the subsidy – no break
  • All basic coverage is eligible for a subsidy EXCEPT a health FSA (HRA IS included)
  • Retiree coverage is included for purposes of the subsidy
  • Reduction in hours is definitely seen as an involuntary termination

Most importantly, the notice makes clear what constitutes Involuntary Termination which, along with reduction in hours, are the two qualifying events that allow for receipt of the subsidy:

The Notice defines an involuntary termination of employment as a severance from employment due to the independent exercise of the employer’s unilateral authority to terminate the employment, other than due to the employee’s implicit or explicit request, where the employee was willing and able to continue performing services.  An employee initiated termination of employment constitutes an involuntary termination of employment for purposes of the Subsidy if the termination of employment constitutes a termination for a good reason.

The notice is specific about some termination scenarios that qualify as involuntary termination

  1. Non renewal of an employee’s contract if the employee was otherwise willing to enter into a new contract or continue employment without a contract, assuming the employee knows that the contract would only be for a limited amount of time
  2. Participation in a window program that meets appropriate Treasury requirements
  3. Employer initiated action to end an individual’s employment while the individuals is absent from work due to illness or disability if, before the action, there is a reasonable expectation that the employee will return to work after the illness or disability subsides.
  4. Involuntary termination for cause, provided, however, if the termination is due to gross misconduct of the employee, the loss of coverage due to a termination of employment for gross misconduct will not result in an individual becoming eligible for the subsidy

The notice is equally specific about what is NOT involuntary termination – and thus employees in these situations are NOT eligible for the subsidy

  1. An employee initiated termination of employment due to the employee’s child being unable to attend school or childcare facility due to COVID. If, however, the employer maintains the ability to return to work so that the event is a temporary leave of absence, then the employee could qualify for the premium subsidy as a voluntary reduction in hours
  2. An employee initiated termination of employment due to general concerns about workplace safety (unless employee can demonstrate that the employer’s actions resulted in a change to the employment relationship analogous to a constructive discharge)
  3. Termination due to gross misconduct (note – be careful here, as the definition of what constitutes gross misconduct is extremely narrow)
  4. Retirement, unless the facts indicate that the employee was willing to work and knew the employer was planning on terminating the employee
  5. Death of the employee