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 features full COBRA subsidies from the federal government for a six month window beginning April 1. If a person loses their job or has a reduction in hours for involuntary reasons, 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.

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 who are enrolled in a Dependent Care Assistance Plan (DCAP) through their employer may see their maximum contribution limits increase. Under ARPA, the 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 plans. A plan may be amended retroactively to allow for the DCAP changes as long as the amendment is adopted by the last day of the plan year in which it 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.

DataPath, Inc. creates cloud-based technology solutions for the administration of employer-sponsored benefits including DCAP and COBRA.

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