Question: We have an employee who was laid off in April due to COVID. During this time he elected COBRA. He currently owes $10,000 in COBRA premiums. We are in the processing of rehiring him. Can we make him pay the past due COBRA premiums now that he will be working again?
Answer: No. On May 4, 2020, the DOL and IRS issues a joint ruling that temporarily extends the period in which eligible employees can elect COBRA and the deadline for them to begin making COBRA payments. The rule extends most COBRA deadlines to beyond the “Outbreak Period,” which it defined as March 1, 2020, to 60 days after the end of the declared COVID-10 national emergency, or another date if provided by the agencies in future guidance. If the emergency declaration expires on December 31, 2020, the Outbreak Period will end on March 1, 2021, for example. The participant/new employee has until 60 days after the end of the Outbreak Period.
Side Note: Upon being hired and becoming active on the group plan, if the participant and his/her beneficiaries did not have any claims during the COBRA window, he could decline COBRA and not owe the balance due. For more information, click here.
Question: Has the IRS extended good-faith relief when employers furnish or file incorrect or incomplete 2020 Forms 1094/1095 and extended deadlines for furnishing statements to individuals similar to relief provided in prior years?
Answer: Yes. For an overview of the good-faith relief that has been extended and the extended deadlines for 2020 forms due in 2021, please see the full Advisor. The IRS notes that unless it receives comments as to why relief continues to be necessary, no relief for furnishing statements will be granted in future years. Comments must be submitted by February 1, 2021.
Question: The Department of Health and Human Services (HHS) has extended the duration of the public health emergency due to COVID-19 effective on October 23, 2020. Generally, a public health emergency declaration lasts for 90 days (this would make the new end date: January 21, 2021) How does this affect group health plans?
Answer: Under the Families First Coronavirus Response Act (FFCRA), as amended by the Coronavirus Aid, Relief, and Economic Security Act (CARES Act), a group health plan must provide coverage without cost sharing for in vitro diagnostic tests for detection of SARS-CoV-2 or the diagnosis of COVID-19 and the administration of such tests for the duration of the public health emergency due to COVID-19. HHS recently extended the duration of the public health emergency due to COVID-19 to January 21, 2021. HHS has previously extended the end date of the public health emergency multiple times so employers should stay apprised of any further extensions.
Question: We have a full-time employee. Her hire date was 4/1/16. She is going to a part-time position as of 4/1/20. She is currently eligible for and on the group health plan. When does her coverage end, and when do we offer COBRA?
Answer: The answer depends on if you are an Applicable Large Employer (ALE) or not. If you are an ALE, you will need to refer to your Standard Measurement Period (SMP).
- The SMP is a period of time where all ongoing employees (including full-time) work and accumulate paid hours.
- Typically, a 12-month* period of time where employees work.
- A period of time that should be used year over year at the same time.
- At the end of the SMP is the Standard Administrative Period.
- During this time, the employer calculates paid hours to determine which employees have accumulated an average of 30 hours or more per week.
- The Administrative Period cannot exceed 90 calendar days.
- Once eligibility is determined, those paid for 30+ hours per week are eligible for coverage during the Standard Stability Period (SSP).
- The SSP is typically a 12-month* period.
To determine if an ongoing full-time employee is eligible to maintain coverage as is or be offered COBRA when moving to a part-time position, the above information is necessary to answer this question.
- The health plan renews 1/1 – 12/31. The SSP (period in which employees are eligible for coverage) typically follows the renewal period, although it can be any period of time between 6-12 months*.
- Ongoing employees’ hours are calculated during the Administrative Period prior to the SSP. The Administrative period in this example is 10/15-12/31.
- The SMP (hours accumulating) is prior to the Administrative Period and should be the same length as the SSP. In this case, the SMP is 10/15 – 10/14.
The employer asking this question uses the look-back measurement period*.
SMP – 10/15/18 through 10/14/19
Administrative Period – 10/15-12/31/19
SSP – Calendar Year 2020
As the employer stated, the employee’s hire date was 4/1/16. She is full-time and benefits eligible. She has decided she wants to work part-time. When does the employer terminate her health benefits and offer COBRA?
Because the employee is considered ongoing and she chooses to work part-time in the same position, the employer would look at the prior SMP and see how long she is eligible in the SSP.
She was considered full-time (30+hours per week) during the SMP, so she is eligible for benefits through the end of the SSP (12/31/20).
- This means, she should be offered the option to retain benefits from 4/1 – 12/31/20. She would still be responsible for the share of the premium.
- If she chooses to retain benefits through 12/31/20, she will be counted in the following SMP (10/15/19-10/14/20) to determine eligibility for 2021. If she fails to accumulate an average of 30+ hours per week during the SMP, she would be offered COBRA as of 1/1/21.
- If she chooses to terminate her benefits (i.e., payroll deduction is too expensive, she has coverage through a spouse, etc.), COBRA would be offered 4/1/20.
Even if an employer does not have any part-time or variable hour employees, it is important to maintain a Standard Measurement/Administrative/Stability Period for these situations.
*This is one example of a look-back measurement. This is not all-inclusive. In addition to the look-back measurement period, employers have an option to use a monthly measurement. Please refer to The Play-or-Pay Penalty and Counting Employees under the ACA, Sections 6 and 7 for more detailed information.
This information is provided for educational purposes only; it’s not intended to provide legal advice.
Question: What is the adjusted affordability percentage for employer-sponsored group health plan coverage for a 2021 plan year under the Patient Protection and Affordable Care Act (ACA)?
Answer: The adjusted affordability percentage, as announced in Internal Revenue Service Rev. Proc. 2020-36, is 9.83% for 2021. The affordability percentage applies on a plan year basis. Therefore, a plan that begins in 2020 will be able to use the 2020 percentage (9.78%) for the entire plan year. For a plan year beginning in 2021, the affordability percentage will be 9.83%.
Question: May a COBRA participant change plans during open enrollment?
Answer: Yes, at open enrollment, the plan must give a COBRA participant the same opportunity to change plans as it gives to active employees. This means that if active employees may select a different group health plan, then COBRA participants must also have the same opportunity to select a different group health plan.
As a best practice, when the plan sends enrollment forms and related documents to active employees, the plan should send these documents to COBRA participants to ensure that they have the opportunity to make open enrollment decisions.