IRS gives an update for COBRA under the American Rescue Plan Act of 2021

by | May 24, 2021

The IRS released a notice providing guidance for employers, plan administrators and health insurers regarding the new tax breaks available under the American Rescue Plan Act of 2021 for the continuation of health coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA).

Under the American Rescue Plan Act of 2021, there’s a temporary 100% reduction in the premium that individuals have to pay when they elect COBRA continuation health coverage plans after a reduction of hours or involuntary termination of employment. The new law provides a corresponding tax credit for the employers and insurers that maintain group health plans. The premium reduction and the tax credit are also available to continuation coverages for similar events related to State laws, often referred to as “mini-COBRA.”

The notice provides key information on calculating the credit, eligibility of individuals, and the assistance period as well as other details about the credit that is available. For more information, please read Notice 2021-31 or reach out to us to further assistance.

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