Immediate Impact to Benefit Programs from The American Rescue Plan Act
Last Updated on March 12, 2021 by VantagePoint
Dependent Care Limit Increases and Full COBRA Subsidies
The relief bill (ARPA) signed by President Biden on March 11th temporarily increases the maximum contribution amount for Dependent Care Assistance Plans (DCAP) and provides full COBRA subsidies under certain circumstances.
DCAP Maximum Contribution Increase
Beginning in 2021, employees participating in their employer’s DCAP plan may now contribute up to $10,500 annually (up from $5,000). Taxpayers who are married, filing separately, will see an increase to $5,250 from $2,500.
Plans can be amended retroactively for the change so long as the amendment is adopted by the last day of the plan year in which the amendment is effective.
COBRA Subsidies
ARPA establishes a 100% COBRA premium subsidy for certain qualified beneficiaries during the period beginning April 1, 2021, and ending September 30, 2021.
The qualified beneficiary must be eligible for and elect COBRA for a period of coverage within the subsidy period due to involuntary termination of employment or reduction of hours. This applies for those who elected COBRA previously and are still enrolled as of April 1, as well as those who enroll on or after April 1 as outlined below.
The employer will pay 100% of the COBRA premium for the April 1-September 30, 2021 time period and will be reimbursed by the federal government through a credit against payroll taxes or, for credit amounts exceeding payroll taxes, as a refund of an overpayment.
COBRA Enrollment Period
Under ARPA, 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 discontinued 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.
Currently, we are consulting with our legal and IT teams on how best to administer these new, but temporary programs.
We will provide a follow-up soon with additional details.
In the interim, if you have any questions, please reach out.