The IRS has issued guidance on temporary health coverage premium relief and related tax credits under a coronavirus pandemic response law.
In Notice 2021-31, 2021-23 IRB 1, the IRS provides 86 questions and answers related to the COBRA premium relief enacted in the American Rescue Plan Act of 2021 (P.L. 117-2).
The 100 percent COBRA premium subsidy is available for up to six months (from April 1 to September 30) to individuals who have lost coverage because of a reduction in hours or involuntary termination. Employers, insurers, and multiemployer plans that provide it are entitled to a refundable tax credit for their share of the subsidy amount.
Rachel Leiser Levy, IRS associate chief counsel (employee benefits, exempt organizations, and employment taxes), said May 10 that the notice would address about 100 questions. Speaking at the American Bar Association Section of Taxation virtual meeting, she said guidance on the COBRA premium subsidy was a priority for the IRS.
The notice addresses eligibility for the new COBRA premium subsidy, application in situations of reduction in hours, involuntary termination of employment, what coverage is eligible for assistance, the beginning and end of the assistance period, extended election periods, extensions under emergency relief notices, payments to insurers under federal COBRA, comparable state continuation coverage, calculation of the credit, and claiming the credit.
The guidance provides examples to assist employers, plan administrators, and insurers in understanding and applying the new subsidy and tax credit. The examples include determining when an assistance-eligible individual first becomes entitled to receive COBRA premium assistance and how the premium payee can claim and report the credit.
The notice says Treasury and the IRS are still considering other issues concerning the COBRA premium assistance provisions and could issue more guidance.