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Understanding and Applying the Changes to COBRA and FFCRA

This article is co-authored by Chris Hysinger, Consulting CFO, and Kelly Wells, Senior HR Consultant.

The American Rescue Plan Act (ARPA) became effective on April 1, 2021 and extended federal reimbursement provisions that were put in place by the Coronavirus Aid, Relief, and Economic Security Act. Included among ARPA’s many provisions were significant updates to the Consolidated Omnibus Budget Reconciliation Act (COBRA) and the Families First Coronavirus Relief Act (FFCRA) – updates that will impact both employers and employees alike. It is important for organizations to ensure they, their workers, and relevant partners are aware of these changes and understand how to apply them.

It is understandable that the HR and finance departments of small- and medium-sized companies find it difficult to keep up with evolving legislation. It is common too for companies to outsource COBRA administration, payroll, and other related functions with the expectation that these service providers will know what to do. Unfortunately, many providers are unaware of the full scope of changes or misunderstand key provisions. Employers are responsible for compliance even if they have outsourced some of the execution. As such, it is highly recommended that organizations inquire about these obligations. This is important to minimize risk, confirm tax advantages, and help to ensure that employees receive the benefits they are entitled to.

Summary of ARPA-related Changes to COBRA

One element unchanged by the ARPA is that providing COBRA coverage to eligible employees remains mandatory for employers. In a new twist, the ARPA provides temporary premium assistance to pay for coverage to qualifying individuals. Premium payment is available to employees who have elected for COBRA coverage as a result of their or a family member’s hours being reduced or involuntary termination of employment. Under ARPA, eligible individuals can have their COBRA premiums between April 1 and September 30, 2021 paid through this government program.

The premium assistance provisions noted above apply to all group health plans sponsored by private-sector employers or organizations subject to COBRA rules, as well as some state and local governments.

Premium assistance ends when the participant becomes eligible for another group health plan.

It is very important to note that individuals who either elected not to participate in COBRA or who were on COBRA and later canceled their coverage may be eligible to elect COBRA coverage again to benefit from premium assistance. Extended Election Notices must be sent to Assistance Eligible Individuals (AEIs) by May 31, 2021.

Time is very short to be compliant on this. Be sure to send them or ensure your outsourced COBRA management firm has sent them.

Summary of ARPA-related Changes to FFCRA

Two significant changes to FFCRA under the ARPA include an extension of the period during which eligible employers can claim the refundable tax credits associated with paid leave and the reasons for which those tax credits can be claimed. Past credits are claimed via amended employment tax returns, while estimated future credits can be funded by withholding certain employee and employer taxes on wages between April 1 – December 31 from the IRS. Employers that ultimately have more credits than taxes owed will be entitled to a refund.

The ARPA also changes aspects of the emergency family leave portion of the FFCRA. Two weeks of paid sick leave at full pay are available to employees who are quarantined or experiencing COVID-related symptoms. Additionally, paid family leave at 2/3 pay is available to employees impacted by caring for a COVID-impacted family member or school or daycare closure. The length of this leave has been extended from ten weeks to twelve weeks.

The six original criteria that determined eligibility for receiving paid sick leave under FFCRA has grown to nine. As of April 1, leave can now also be used when an employee is being vaccinated for COVID-19, recuperating from side effects related to the vaccine, and when an employee is seeking and awaiting COVID-19 test results.

Ensuring Awareness and Avoiding Pitfalls

Every company should be aware and take advantage of the COBRA premium assistance that the ARPA offers. Naturally, companies that offer paid leave should do the same when it comes to the act’s FFCRA-related tax credits. Not only is it a smart thing to do from a financial perspective, but it’s also the right thing to do for employees. Companies demonstrate value for employees by ensuring awareness and encouraging participation as needed.

To echo an earlier point, it is crucial that employers get it right when it comes to claiming the tax credits associated with the ARPA’s COBRA and FFCRA updates. Lack of awareness or understanding can mean leaving money on the table. Worse yet, claiming more credit than what is due can open organizations up to inquiries and legal ramifications. Delegating the daily duties of payroll and related functions to a service provider does not remove a company’s responsibility for ensuring adherence to the requirements the legislation sets forth.

Take the time and get the additional expertise needed to ensure the proper application of these updates and to ensure you are receiving full benefit from this legislation.


Not sure if your organization is compliant with recent legislation or properly applying for or taking full advantage of benefits and allowances? Request a consultation today from either a vcfo Finance or HR expert. We have worked with more than 5,000 business teams in our 25 years. We would love to talk with you, hear your story and concerns, and share our experience and collective wisdom to see how we can help.