ARPA COBRA Subsidy Expires. Now What?


As I’m writing this, the American Rescue Plan Act of 2021 (ARPA) COBRA “Subsidy Expiration” letters are being generated. After checking in with LAAHU and NAHU, there currently are no discussions in Washington, D.C. about extending the subsidies. It appears that this is the end, my friend.

EDITOR’s Note: The industry has been focused on implementing the American Rescue Plan Act of 2021 (ARPA). Now, employers and plan administrators must turn their attention to preparing the necessary notice to some Assistance Eligible Individuals (AEIs)
concerning the expiration of any COBRA subsidies they have received.  To ensure compliance, plan administrators must provide a timely notice to those AEIs who wish to maintain their COBRA continuation coverage after the subsidy has ended.

Plan administrators must notify AEIs at least 15 days (but no more than 45 days) before they will lose the subsidy. For most employers, this will be between August 17 and September 30, 2021.

The subsidy Expiration Notice must only be provided to AEIs who are eligible to continue COBRA beyond the coverage period ending September 30, 2021. Plan administrators are not required to provide the Expiration Notice to any individual who voluntarily drops COBRA coverage, enrolls in other group health plan coverage  or Medicare, or whose maximum COBRA coverage period ends before September 30, 2021.

So, back to the topic of this article:
Now what!?
Ha! We all know the busiest time of the year is upon us and there are lots of details we need to be aware of so we can best serve our clients. But how about we just try to relax a couple of minutes, or just long enough for you to read this page? We’re not going to do meditation here, instead, I’ll give a couple of quick reminders and mix in some fun and sometimes silly questions I’ve received from agents, employers and plan participants over the years. Because I’m with PayPro Administrators, the topics will include Premium Only Plans, COBRA, Account-Based Plans, etc. Don’t take anything the wrong way — this is intended to provide a little laughter and levity — not upset anyone.

But, on a serious note: The questions and answers should not be construed as legal advice as they are general in nature and I’m not an attorney.

ARPA/COBRA conversations

Agent: “I’m so glad this whole ARPA thing is over. My client had three people receiving the subsidies and it was a hassle. I’ve told the client there is nothing else to do as it expires at the end of September.”
Me: “Don’t forget the ‘End of Subsidy’ notices! They are still required to be mailed. Don’t forget that step.”
Agent: “Damn, I thought everything was done.”
Me: (in my head, I wished that months ago – LOL)

Pro Tip: This is an important reminder that the requirements are/were very specific and missing a single step of the process can make a big difference. This applies to every aspect of serving your clients.

Me: “Hi! Joe XXX from XX Insurance Agency asked me to give you a call and talk to you about COBRA Administration. Joe said you have about 39 employees, and 11 are enrolled in your medical insurance plan.“
EMPLOYER: “Yes, but I told my agent we don’t need a COBRA Third Party Administrator (TPA) because no one ever wants COBRA. I don’t know why he wanted you to call me!”
Me: “Oh, well it’s a little more involved than that. I’ll go over that in
a moment, but first a quick question: Have you sent out the ARPA COBRA subsidy notices?”
Me: (Crickets)

Pro Tip: If you’re not sharing this type of information with your client, they likely aren’t aware. Help protect and educate your groups.

Me: (I received a call from an employer group, telling me they had a new agent working with them; a friend of the owner. I called to introduce myself and PayPro Administrators and asked how the enrollment went.)
Agent: “I enrolled the employees last week and it was easy! Now all I have to do is wait for the commissions to start coming in. This is my first group. Anyways, why are you calling me? What do you do with my client?”
Me: “Congratulations on your first group. How long have you been in the industry?”
Agent: “I got my license a month ago; before that, I was in real estate. That was hard compared to this.”
Me: “Hmmm. Are you working for an agency? On your own? If you’re on your own, are you working with a GA (general agent)?”
Agent: “What’s a GA?”
Me: Sigh.

Pro Tip: If you’re new in this business, you have many resources available to you! Utilize the knowledge and services of those within this industry. Consider working with a GA, joining a professional association, such as NAHU, and take continuing education (CE) courses for the information, not just the credit.

Section 125 Stuff – Premium Only Plans (POP)
Agent: “My employer group has a premium-only plan (POP) and we’re adding an Health Savings Accounts (HSA) compatible health plan, and an HSA as a part of their benefits. Is there anything I need to do?“
Me: “Yes, if the HSA contributions are going to be made pretax through payroll, you’ll need to modify your POP document to include specific HSA language.”
Agent: “So the POP document needs to be redone? I didn’t know that. What do I have to do?”
Me: “Call your TPA, an ERISA expert or your GA. They can likely assist you
or point you in the right direction. Tell them just what you told me and make sure you have it prepared/adopted before the HSA pre-tax contributions are made. If you also have Flexible Spending Accounts (FSA) in place, you’ll also need to modify the documents and add a Limited Purpose and/or Post Deductible FSA. The LPFSA/Post Deductible FSA can be used for dental and vision, as well as post deductible expenses for those contributing to an HSA on a tax-advantaged basis.”
Agent: “Is this really required?”
Me: (Radio silence)

Pro Tip: Have a conversation with your TPA if your client has a POP or section 125 plan, including Flexible Spending Accounts when or if any new plans or details are changing.

POP Doc conversations
Agent: “Do we need a new POP document every year? XXXX Payroll Company requires it for my client.”
Me: “There are two things you should know:
First, the payroll provider is a payroll provider, not the employer. They provide payroll services for the employer. There isn’t a rule or law that indicates the payroll service company needs to have the documents in hand to allow for pretax deductions. “Requiring” the documents may be a way to obtain additional business, as the payroll service provider will then likely offer to create those documents for the client, at a fee. A good payroll provider may ask if the employer has a current document in place, just as a reminder or to make sure the client is aware of the requirement.
“And second: No — you don’t necessarily need a new plan document every year, but you do need a current document! When in doubt, get a new document or better yet, provide an annual plan document service for your clients. Document language consistently changes and you’ll definitely sleep better at night knowing that your client has a current plan document. Agents and brokers have multiple sources where documents can be obtained. Reach out to your GA, your Compliance Team, an ERISA attorney, or your TPA Service Provider.”

Pro Tip: Consistently communicate with and educate your clients. Remind them of the services you perform, required compliance information, and how you can assist them every step of the way. Protect your clients and your business.

POP – Non-Discrimination Testing
Agent: “Do we need to test a Premium Only Plan (POP) or non-discrimination testing? I heard that wasn’t required. I don’t want to waste time or spend that money if it’s not necessary.”
Me: “The IRS regulations include a special safe harbor for standalone premium-only plans. That is important to note — it’s only for POP.

Under this safe harbor, a POP is deemed to satisfy the cafeteria plan nondiscrimination requirements if it passes the eligibility test. In other words, the plan will automatically satisfy the contributions and benefits test and the key employee concentration test if it passes the eligibility test.

The eligibility test can be summarized: If the same benefits are offered and available at the same rate and time to all eligible employees, it likely passes the eligibility tests. BUT – if HSAs or Flexible Benefits/Spending Accounts are in place, this safe harbor does not apply.”

Pro Tip: Talk to your ERISA expert or document service/TPA.

Flexible Spending Accounts Conversations
Participant: “Can my vet bills be reimbursed under the Health FSA?”
Me: “I’d need more information: Is the animal a service animal, such as a guide dog that could aid/assist you if you were visually impaired?”
Participant: “No, but when I took her to the vet last week it was $350 for some dental work. Way too expensive — and I want to use my FSA for it. She’s my baby, a cute little chihuahua that I love.”
Me: “Sorry, that’s probably
not going to be an eligible expense under the Health Care Flex Spending Account.”
Participant: “So, can I use my Dependent Care FSA instead?”
Me: (visualize hand slapped on forehead)

Pro Tip: Provide materials that communicate eligible expenses, guidelines and specifics about the Flexible Spending Accounts before enrollment and each year.

Plan Participant: (Angry and upset because we didn’t approve an expense for reimbursement under their FSA). “You HAVE to reimburse me for Botox because I’m the “face” of XXX Company. My father is the owner…”
Me: “Oh, I understand what you’re saying, but that isn’t an eligible expense for reimbursement, in this circumstance. I’m sorry I wish I could change the rules.” (This was said seriously.)
Participant: “That doesn’t make sense! It is necessary and expensive… Wait, maybe it could qualify as an employment expense?”
Me: “Oh, I have never thought about that. Perhaps you should talk with your CPA.”
Participant: “I’m having a laser peel done in a month, I’ll ask that, too!

Pro Tip: Same as previous.

Participant: “I didn’t use all my money in the Health Care FSA and my employer said we have a use-it-or-lose it plan. It’s my money! You have to give me MY money!”
Me: (after reviewing their plan documents) “Gosh, I understand your frustration, but these types of plans have very specific guidelines and rules. (When you signed up – the use it or lose it rule was on your enrollment form). But you still have 90 days after the plan year ends to submit expenses that you incurred during this last plan year. Do you have any expenses you’ve not yet submitted?”
Participant: “I’m calling an attorney. You are stealing my money.”

Pro Tip: Again, same as above. Providing the plan documents to employees is also a requirement. It specifies eligibility information, year-end options, irrevocable elections, and more.

Participant: “My husband wants his mother to live with us, but I don’t want her to. Can you give me something in writing that says there is not a tax benefit in doing so?”
Me: (I’m staying out of that one.)

Pro Tip: You stay out of that too!

Employer: “Our other TPA didn’t ask for any receipts or documentation if the expense was under $100. Why do you? It seems nitpicky. Or perhaps you don’t trust me and my employees?!”
Me: “Uhm, we follow the rules.” (I didn’t say it exactly like that, lol)

Pro Tip: Work with or recommend a qualified and professional TPA. Ask your industry colleagues for a referral. And interview the TPA(s) before you introduce them to your clients.

BOBBI KAELIN is the vice president of Sales and Marketing at PayPro Administrators. PayPro was established in 1989 and provides payroll, ACA filing, ERISA plan docs and Form 5500 prep, COBRA, §125 and more. We’re a broker-driven company, and as such we do not sell or offer insurance products to your clients. We are part of your team!
Bobbi is a member of and has served on the boards for the Los Angeles Association of Health Underwriters (LAAHU) and the Employee Benefit Planning Association (EBPA) of Southern California. She is also a Continuing Education Provider and will happily provide education within her areas of expertise.
Mobile: 951-897-6085
Office: 951-656-9273 x 212 or 226 (Michael Eastman)