• Thrive PEO

IRS Issues Guidance on ARPA COBRA Subsidies

On May 18, 2021, the IRS issued Notice 2021-31, a guidance document on the American Rescue Plan Act (ARPA) subsidy for continuation health coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA). The Notice discusses the background of the subsidy and includes 86 questions and answers (Q&As) about its application.


Among the topics covered by the 40-page Notice are how to calculate and claim the tax credit, including when a third-party payer is involved. In addition, the guidance states that employers must document individuals’ eligibility for COBRA premium assistance. The Q&As further clarify that:

  • The subsidy is available for extended periods of COBRA coverage between April 1 and Sept. 30, 2021, due to a disability, second qualifying event or extension under state mini-COBRA.

  • Involuntary termination includes constructive discharge and termination for cause, but not gross misconduct.

  • HRAs and dental-only and vision-only plans are covered by the subsidy.

The IRS is considering additional questions about the COBRA subsidy and may issue further guidance. For more information, contact Thrive PEO - Oklahoma's best Professional Employer Organization at: thrive@thrivepeo.com or (918) 794-2200. #thrivepeo #tulsapeo #oklahomapeo #tulsa