WASHINGTON — The Inter­nal Rev­enue Ser­vice today pro­vid­ed guid­ance on tax breaks under the Amer­i­can Res­cue Plan Act of 2021 for con­tin­u­a­tion health cov­er­age under the Con­sol­i­dat­ed Omnibus Bud­get Rec­on­cil­i­a­tion Act of 1985 (COBRA).

Notice 2021–31 PDF pro­vides guid­ance for employ­ers, plan admin­is­tra­tors, and health insur­ers regard­ing the new cred­it avail­able to them for pro­vid­ing con­tin­u­a­tion health cov­er­age to cer­tain indi­vid­u­als under COBRA.

The Amer­i­can Res­cue Plan pro­vides a tem­po­rary 100% reduc­tion in the pre­mi­um that indi­vid­u­als would have to pay when they elect COBRA con­tin­u­a­tion health cov­er­age fol­low­ing a reduc­tion in hours or an invol­un­tary ter­mi­na­tion of employ­ment. The new law pro­vides a cor­re­spond­ing tax cred­it for the enti­ties that main­tain group health plans, such as employ­ers, mul­ti­em­ploy­er plans, and insur­ers. The 100% reduc­tion in the pre­mi­um and the cred­it are also avail­able with respect to con­tin­u­a­tion cov­er­age pro­vid­ed for those events under com­pa­ra­ble State laws, some­times referred to as “mini-COBRA.”

Notice 2021–31 pro­vides infor­ma­tion regard­ing the cal­cu­la­tion of the cred­it, the eli­gi­bil­i­ty of indi­vid­u­als, the pre­mi­um assis­tance peri­od, and oth­er infor­ma­tion vital to employ­ers, plan admin­is­tra­tors, and insur­ers to under­stand the credit.

COBRA pro­vides cer­tain for­mer employ­ees, retirees, spous­es, for­mer spous­es, and depen­dent chil­dren the right to tem­po­rary con­tin­u­a­tion of health cov­er­age at group rates. COBRA gen­er­al­ly cov­ers health plans main­tained by pri­vate-sec­tor employ­ers with 20 or more full and part-time employ­ees. It also cov­ers employ­ee orga­ni­za­tions or fed­er­al, state or local gov­ern­ments. State mini-COBRA laws often pro­vide sim­i­lar ben­e­fits for insured small employ­ers not sub­ject to Fed­er­al COBRA.

The IRS will con­tin­ue to update infor­ma­tion relat­ed to health plans on IRS.gov.

Orig­i­nal­ly post­ed on IRS.gov