Employers can recover the amounts that they expend on the ARPA COBRA subsidy by claiming tax credits against the 1.45% employment tax they pay for hospital insurance.
The American Rescue Plan Act (ARPA), signed into law by President Biden on March 11, 2021, includes provisions that will significantly impact plan sponsors and administrators of health and cafeteria plans. The ARPA also impacts pension plan funding requirements and executive compensation deductions available to employers. These provisions and their potential impact on plan sponsors, plan administrators and employers are discussed in more detail below.
Paige A. Haughton advises corporate and nonprofit clients of Ballard Sparh on employee benefit and executive compensation matters. She assists clients with the design, administration, and governance of retirement, health and welfare plans. COBRA subsidy
The ARPA will require employers to implement new operational measures in the administration of COBRA benefits over the next six months. The statute requires employers to provide a full subsidy for individuals who qualify for continued health coverage under COBRA (or state mini-COBRA laws) on account of an involuntary termination of employment or a reduction of hours. It appears that individuals who voluntarily reduce their hours will qualify for the subsidy as well.
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