ARPA is Approved: COBRA Subsidies and DCAP Increase Part of Legislation

U.S. Capitol building; ARPA legislation and COBRA subsidies

President Biden signed The American Rescue Plan Act (ARPA) of 2021 into law on Thursday, March 11, 2021. In addition to stimulus checks and child tax credits, ARPA features full COBRA subsidies for a limited time and an increase in the maximum contribution limits for people who use Dependent Care Assistance Plans (DCAP) through their employer. Learn more below.

COBRA Subsidies Under ARPA

Under very specific circumstances, the ARPA legislation provides full COBRA subsidies from the federal government for a six-month window beginning April 1. If a person loses their job for involuntary reasons or has a reduction in hours, they qualify for a full COBRA subsidy from April 1, 2021 through September 30, 2021.

During this period, the terminated employee does not have to pay the COBRA premiums out-of-pocket. The employer or insurer will pay the premium amount in full and receive reimbursement from the federal government.

COBRA Subsidy and Enrollment Guidelines

A qualified beneficiary must be eligible for and elect COBRA for a period of coverage within the subsidy period due to involuntary loss of employment or a reduction of hours. This also applies for those who elected COBRA previously and are still enrolled as of April 1, 2021.

A terminated worker who is eligible for assistance and who hasn’t elected COBRA coverage by April 1, or who elected COBRA coverage but then stopped it, may elect COBRA coverage during an enrollment period starting April 1 and ending 60 days after the date on which the COBRA notification was delivered.

DCAP Maximum Contribution Limit Increases

Beginning in 2021, people enrolled in a Dependent Care Assistance Plan (DCAP) through their employer may see their maximum contribution limits increase. Under ARPA, the statutory limit was raised to $10,500 from $5,000 annually; for people who are married filing separately, the limit increased to $5,250 from $2,500. 

To allow for this change, employers must amend their plan documents. A plan may be amended retroactively to allow the DCAP limit increase as long as the amendment is adopted by the last day of the plan year in which the amendment goes into effect.

On February 26, 2021, the Department of Labor clarified COBRA election time periods during COVID-19. For general information on COBRA, refer to our COBRA FAQ page.

Editor’s Note:  ARPA allowed a full COBRA subsidy until September 30, 2021 which has now passed. President Biden has announced a strategy called “Path out of the Pandemic” to recover from the financial and economic toll this health issue has created. The administration is also promoting a “Build Back Better” agenda to create jobs, cut taxes and lower costs to continue with economic recovery.

As executive branch, legislative and regulatory efforts continue, it’s important to stay up to date on how these programs may affect employers and employees. Contact your third-party administrator (TPA) or qualified benefits counsel to determine the best direction for your employer plans.

For 40 years, DataPath has been a pivotal force in the employee benefits, financial services, and insurance industries. The company’s flagship DataPath Summit platform offers an integrated solution for managing CDH, HSA, Well-Being, COBRA, and Billing. Through its partnership with Accelergent Growth Solutions, DataPath also offers expert BPO services, automation, outsourced customer service, and award-winning marketing services.

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