On May 18, 2021, the Internal Revenue Service published guidance in the form of a series of 86 questions and answers (“FAQ”) that address the American Rescue Plan Act of 2021’s (“ARPA”) continuation health coverage in the form of “COBRA premium assistance” under the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”), which we previously discussed here. The ARPA provides for a temporary 100 percent reduction in the premium for COBRA continuation health coverage for certain “Assistance Eligible Individuals” (“Free COBRA”) which employers are required to cover and can in turn receive reimbursement for the costs through tax credits.
Two items in the FAQ expand the potential reach of the ARPA, as follows:
1. An employee-initiated termination of employment can constitute an “involuntary termination” if the termination is for “good reason due to employer action that results in a material negative change in the employment relationship for the employee analogous to a constructive discharge.” While the FAQ does not provide a definition for “material negative change” or “constructive discharge,” it does provide several examples making clear that this is a narrow concept. Examples include the following:
- An employee is eligible for Free COBRA when quitting due to a personal or family medical issue if (and only if) the employer violates its legal obligations in connection with the same, such as failing to provide a leave or accommodation.
- An employee is eligible for Free COBRA when quitting due to the employer’s material reduction in hours (even if health insurance is not lost) or a material change in geographic work location.
- An employee is not eligible for Free COBRA when quitting due to a safety concern not being remedied after complaining about the same, unless the employee can demonstrate that the employer’s actions (or inactions) resulted in a “material negative change in the employment relationship analogous to a constructive discharge.” While not further clarified, this is likely to mean that serious safety issues that are not remedied could potentially amount to constructive discharge.
Employers should monitor developments expected under future regulations and guidance concerning the ARPA as it relates to COBRA. The Employment & Labor Practice Group at Partridge Snow & Hahn is available to answer your questions about the ARPA. For additional information and resources visit the firm’s COVID-19 Advisory Group page.
