The American Rescue Plan Act of 2021 and its Impact on the Families First Coronavirus Response Act and COBRA

The American Rescue Plan Act of 2021 and its Impact on the Families First Coronavirus Response Act and COBRA


We are writing to provide you with information regarding the American Rescue Plan Act of 2021 (ARPA). This memorandum will provide a summary of: (1) the ARPA’s provisions regarding the voluntary extension of the Families First Coronavirus Response Act’s (FFCRA’s) Emergency Paid Sick Leave Act (EPSLA) and the Emergency Family and Medical Leave Expansion Act (EFMLEA); and (2) the ARPA’s new Consolidated Omnibus Budget Reconciliation Act (COBRA) subsidy.


As explained in our previous FFCRA-related memos,[1] the FFCRA, which expired on December 31, 2020, had two major provisions: the EPSLA and the EFMLEA. In December 2020, Congress passed the Consolidated Appropriations Act of 2021, which authorized employers to voluntarily continue to provide EPSLA and EFMLEA benefits from January 1 through March 31, 2021, to the extent that the leaves had not already been exhausted, while also extending the associated payroll tax credits for providing the leaves.[2]

Similar to the last stimulus package, the ARPA permits employers to voluntarily continue to provide EPSLA and EFMLEA leave benefits and receive payroll tax credits for qualifying leave taken from April 1 through September 30, 2021. With this voluntary extension, however, comes several new changes, which significantly expand the pre-existing EPSLA and EFMLEA leave eligibility for employees. The key changes are summarized below.

EPSLA Changes

• Additional Leave Time: As of April 1, employers must reset the 10-day leave eligibility limit. This means that employees would be eligible for a new set of leave days regardless of whether they had previously exhausted 10 days/80 hours of leave in 2020 or from January 1 through March 31, 2021.

• More Qualifying Leave Reasons: In addition to the six existing qualifying reasons for EPSLA leave eligibility, the ARPA provides the following three new qualifying reasons:

(1) receiving a COVID-19 vaccination;
(2) recovering due to receiving a vaccination; or
(3) seeking or awaiting test results for, or a medical diagnosis of, COVID-19 (regardless of whether the employee is symptomatic, and provided that the employee was exposed to COVID-19 or the testing is at the employer’s request).

EFMLEA Changes

• More Paid Leave: The ARPA has eliminated the FFCRA’s requirement that the first two weeks/10 days of EFMLEA be unpaid unless an employee used EPSLA leave or accruals to cover that period. Now, the entire 12 weeks (or portion thereof if fewer than 12 weeks of leave are taken) must be paid at the rate of two-thirds of the employee’s regular rate of pay, capped at $200/day. As a result, the maximum tax credit is $12,000 in the aggregate for a 12-week EFMLEA leave.

• More Qualifying Leave Reasons: Employees seeking to use EFMLEA may now do so for the same reasons as EPSLA leave, including the three new above-mentioned reasons (i.e., it is no longer limited to situations in which an employee’s child’s school or place of care or care provider is closed or unavailable due to a COVID-19-related reason).

• Reset of the EFMLEA Leave Weeks for Tax Credit Purposes Only: Any days an employee took before April 1, 2021 will not count towards the new EFMLEA cap. As a result, employers are eligible for up to an additional $12,000 of payroll tax credits per employee for EFMLEA leave provided from April 1 through December 31, 2021. Employees, however, continue to be subject to a maximum of 12 weeks of FMLA/EFMLEA leave in a 12-month period, as was the case when the FFCRA was first enacted.

Non-Discrimination Rules

The ARPA provides new non-discrimination rules. The new rules provide that tax credits will not be made available to employers who administer paid leave benefits in a discriminatory fashion favoring highly compensated individuals, full-time employees, or employees with greater seniority. The leave should, therefore, be provided equally and uniformly to all eligible employees.

We encourage you to contact us if you are considering voluntarily extending EPSLA and EFMLEA leave eligibility in accordance with the ARPA so that we can help you determine whether, among other things, you will have any bargaining obligations in connection with the extension of these leaves.


The ARPA requires employers, and their group health plans, to offer 100% subsidized COBRA continuation coverage to eligible plan participants between April 1, 2021 and September 30, 2021.

An eligible plan participant pursuant to the ARPA is defined as an “Assistance Eligible Individual” (AEI). An AEI is any qualifying plan participant who loses or has lost health insurance coverage due to an involuntary termination or a reduction in hours worked,[3] and who elects continuation coverage that is effective during the April 1 through September 30, 2021 timeframe.[4]

Employers Required to Subsidize COBRA Premiums

The requirement to provide fully-subsidized continuation coverage for AEIs applies to: (1) private-sector employers or employee organizations (unions) that are subject to federal COBRA requirements; (2) plans sponsored by State or local governments subject to the continuation provisions pursuant to the Public Health Service Act; and (3) employers that are subject to New York (or another state’s) continuation coverage laws (also known as “mini-COBRA”), even if the employer would not otherwise be subject to federal COBRA.[5]

During the six-month subsidy period (April 1, 2021 – September 30, 2021), the ARPA provides that employers will be reimbursed through tax credits against their quarterly payroll taxes for the costs of the subsidized coverage.[6] If the tax credit exceeds the payroll taxes owed, it will be treated as an overpayment and refunded to the employer. If the cost of subsidized coverage is expected to exceed the quarterly payroll taxes, employers may seek advancement of the credit (as a refund).

Employers that do not satisfy COBRA continuation coverage requirements may be investigated by the DOL and subject to an excise tax pursuant to the Internal Revenue Code.

Extension of COBRA Election Period

The ARPA extends the COBRA election period and allows qualified individuals whose COBRA election period expired prior to April 1, 2021 to elect subsidized COBRA coverage beginning April 1, 2021. Individuals are considered “qualified” as long as they otherwise meet the criteria to be deemed AEIs and remain eligible for COBRA coverage during part or all of the six-month subsidy period. The extension also allows AEIs who previously declined COBRA or elected but then terminated their COBRA coverage (e.g., due to premium non-payment), the ability to elect subsidized COBRA coverage as of April 1, 2021, even if they would otherwise have not been able to do so.[7]

Although the election period has been extended, the ARPA does not extend the normal federal maximum COBRA coverage period of 18 months. Thus, depending on how much of the 18-month coverage an AEI has remaining, an individual may receive COBRA coverage for a portion, but not all, of the six-month subsidy period.

Extension of COBRA Notice Requirements and Model Notices

The U.S. Department of Labor (USDOL) recently issued model notices and FAQs[8] to assist in the dissemination of the ARPA’s COBRA subsidy-related information to qualifying employees. An employer may update its existing COBRA election notices, use the USDOL’s model notices, or create new, separate notices to accompany the traditional COBRA election notice. Eligible employers must provide the following types of notices to AEIs:[9]

1. General Notice and COBRA Continuation Coverage Election Notice: This notice must be provided to AEIs who first become eligible for subsidized coverage during the six-month subsidy period. It must generally advise AEIs about the availability of premium assistance and other specific details about the administration of the subsidized coverage. In addition, employers must provide a continuation of coverage election form. This notice and form must be provided to AEIs as they become eligible, consistent with existing COBRA requirements.

2. Notice in Connection with Extended Election Period: This notice must be provided to AEIs who previously elected, but discontinued their COBRA coverage prior to April 1, 2021, or who previously declined COBRA but are still within their COBRA coverage eligibility period. This notice must be provided by May 31, 2021, and AEIs will have 60 days from receipt of the Extended Election Period Notice to elect (or decline) subsidized COBRA coverage.

3. Notice of Expiration of Premium Assistance: This notice advises AEIs that the subsidized portion of their COBRA coverage will expire on a certain date. It must be provided 15-45 days before the subsidy expires (not earlier or later) as applicable to each employee receiving a subsidy.[10]

4. Alternative Notice: This election notice and coverage continuation election form must be used by employers who are subject to state continuation requirements. Consistent with New York continuation law, an employer must notify qualified beneficiaries of their rights to continue coverage within 14 days of a qualifying event.

5. Summary of COBRA Premium Assistance Provisions: This notice must be enclosed with the General Notice, Notice in Connection with Extended Election Period, and the Alternative Notice.

In light of the applicable deadlines described above, we recommend that you identify your AEIs as soon as possible and issue the required notices.

If you would like assistance with addressing next steps for complying with the ARPA’s mandatory COBRA subsidy, would like to discuss the voluntary extension of EPSLA or EFMLEA leave, or have any questions regarding the contents of this memorandum, please contact Alyssa L. Zuckerman, Michelle Mahabirsingh or one of our other attorneys at 631-694-2300.


[1] See, e.g., our March 25, 2020, April 3, 2020, April 15, 2020, August 28, 2020 and September 23, 2020 client memoranda.

[2] Our December 30, 2020 client memorandum addresses the Consolidated Appropriations Act of 2021 and the voluntary extension of EPSLA and EFMLEA benefits.

[3] The ARPA does not distinguish between voluntary or involuntary reduction in hours.

[4] Pursuant to the ARPA, as with COBRA eligibility in general, an AEI will lose eligibility for COBRA subsidized coverage if the AEI becomes eligible for other group health insurance coverage or Medicare.

[5] New York State law requires small employers (less than 20 employees) to provide the equivalent of COBRA benefits.

[6] There is currently no guidance indicating the process by which insurers/employers will file claims for the refundable tax credits. We anticipate that the IRS will soon issue guidance on this topic.

[7] If an AEI pays in full for any period of COBRA continuation coverage beginning on or after April 1, 2021 through September 30, 2021, they may be eligible for a reimbursement. While there is no deadline for reimbursement, the guidance suggests that employers either reimburse AEIs in a timely manner or provide the reimbursement in the form of a credit against future premiums after September 30, 2021. The USDOL emphasizes that employers should not collect premium payments from AEIs and then require them to seek reimbursement later.

[8] The USDOL FAQs about COBRA Premium Assistance are available at:

[9] The model notices are available at:

[10] This notice is not required where an AEI becomes ineligible for COBRA coverage due to becoming eligible for group health insurance coverage or Medicare.

[11] At this time, it is unclear whether an individual who has dropped mini-COBRA coverage would have the option to re-elect it. If you encounter this scenario, we encourage you to contact us to discuss.

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