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COBRA Subsidy


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Scenario:  An employee was furloughed in early 2020.  He is offered COBRA at that time but does not elect it.  His employer calls him back to work in, say, June 2020.  He declines to come back because he has obtained other employment but is not eligible for coverage at that job.

Is this employee eligible for the second COBRA election period and the COBRA subsidy?  I think he is because his qualifying event was an involuntary termination of employment and the resulting voluntary decision not to return is irrelevant.  

That result doesn't sit well with me.  I have not seen any DOL or IRS guidance on this.

Does anyone have any thoughts on this scenario?

Thanks!

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I'd say he's eligible. He involuntarily lost his job. He's not eligible for other group coverage. Even if the DOL/IRS puts out guidance, this is question is fairly in the weeds and I doubt they'll address such a scenario.

I'd say he was a responsible person for not living on unemployment and going out and finding other work when he had no idea if his employer would call him back.

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I have to agree that I'd look back to the originating event - involuntary furlough/decrease of hours during the period.   But if you want to argue voluntary due to the refusal to return, I'd check with legal counsel.  In the end, the employer is getting a tax credit so there is only the minimal administrative cost of erring on the side of the employee as opposed to higher liability but I am not an attorney.

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If there is an ambiguity:

An employer might consider also checking with some others:

·           the COBRA administrator, if the plan’s administrator engaged one;

·           the health insurer, to the extent (if any) the continuation coverage would be provided through health insurance;

·           the stop-loss insurer if, regarding a self-funded plan, the employer bought that insurance.

Not checking with them could leave an employer exposed to financial consequences that result from offering continuation coverage to someone another decision-maker considers ineligible.

Likewise, an employer might consider informing a continuee that the continuee is responsible to pay whatever portion of the continuation premium the U.S. Treasury does not provide.

Peter Gulia PC

Fiduciary Guidance Counsel

Philadelphia, Pennsylvania

215-732-1552

Peter@FiduciaryGuidanceCounsel.com

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Unless the impending Treasury guidance states otherwise, I would treat this as an AEI situation because the ARPA definition is focused only on the actual COBRA qualifying event.  The COBRA qualifying event was the loss of coverage caused by the involuntary reduction of hours.

Under the basic statutory terms, the only intervening event that could remove AEI status during the maximum coverage period would be becoming eligible for another group major medical plan or Medicare.  Subsequently declining a rehire opportunity shouldn't affect that analysis.

From ARPA:

(3) ASSISTANCE ELIGIBLE INDIVIDUAL.—For purposes of this section, the term ‘‘assistance eligible individual’’ means, with respect to a period of coverage during the period beginning on the first day of the first month beginning after the date of the enactment of this Act, and ending on September 30, 2021, any individual that is a qualified beneficiary who— (A) is eligible for COBRA continuation coverage by reason of a qualifying event specified in section 603(2) of the Employee Retirement Income Security Act of 1974, section 4980B(f)(3)(B) of the Internal Revenue Code of 1986, or section 2203(2) of the Public Health Service Act, except for the voluntary termination of such individual’s employment by such individual; and (B) elects such coverage.

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