Is COBRA subsidies under ARPA?
Asked by: Eva Hammes | Last update: December 27, 2025Score: 5/5 (67 votes)
What are ARPA subsidies?
Temporary subsidies were originally passed as part of the American Rescue Plan Act (ARPA) in 2021, which included two years of enhanced subsidies (2021 and 2022). The Inflation Reduction Act (IRA), which passed in 2022, extended these enhanced subsidies for an additional three years, ending after 2025.
Are COBRA subsidies taxable?
No you do not have to report the COBRA assistance as income. Under Sec. 139I, the premium assistance is excluded from an individual's gross income because the employer or other payer can receive a tax credit for providing the coverage.
How do I claim my COBRA subsidy credit?
Request a Refund for Amounts Paid in COBRA Premiums Exceeding Federal Employment Tax Liability: The employer may claim the Credit through an employment tax refund on the applicable employment tax return, generally Form 941, Employer's Quarterly Federal Tax Return.
Is COBRA subsidized by employer?
Some employers may subsidize or pay the entire cost of health coverage, including COBRA coverage, for terminating employees and their families as part of a severance agreement.
COBRA Subsidies Under ARPA
Who pays for COBRA coverage?
Group health coverage for COBRA participants is usually more expensive than health coverage for active employees, since usually the employer pays a part of the premium for active employees while COBRA participants generally pay the entire premium themselves.
What does it mean when an employer is subsidized?
Subsidized employment, in which the government temporarily subsidizes some or all of an individual's wages, gives participants some economic security and can connect them to unsubsidized employment, improving their long-term job prospects.
What is a subsidy in COBRA?
The federal government initiated several programs to address the challenges posed by the coronavirus outbreak. One of these programs was the Consolidated Omnibus Budget Reconciliation Act (COBRA) subsidy, which excluded qualified individuals from paying premiums for a specified duration.
Is end of COBRA subsidy a qualifying event?
However, you won't qualify if you decide to end COBRA early and are paying the full benefit cost yourself. You also don't qualify if you lose your COBRA coverage because you didn't pay your premiums. Remember, you don't need a special enrollment period if you voluntarily end COBRA during open enrollment.
How do I report COBRA payments on my taxes?
According to the Federal tax laws, your unreimbursed COBRA payments are, in fact, deductible as medical expenses on your 1040 tax return in the same way that you can deduct unreimbursed payments for legal medical services provided by physicians, surgeons, dentists, and other medical practitioners, as well as any ...
What is the 60 day loophole for cobras?
You have 60 days to enroll in COBRA once your employer-sponsored benefits end. Even if your enrollment is delayed, you will be covered by COBRA starting the day your prior coverage ended.
Are employer subsidies taxable?
Key Takeaways. Fringe benefits, such as life insurance, tuition assistance, and employee discounts, are perks that companies give their employees in addition to regular compensation. Cash-based fringe benefits like bonuses or reimbursements are typically subject to income tax.
Can you get a refund on COBRA?
Generally, there are no refunds when you cancel your plan early. You may contact your administrator or your past employer for specific insurance payment information.
What are the eligible expenses for ARPA?
Eligible uses of these funds include:
COVID-19 expenditures or negative economic impacts of COVID-19, including assistance to small businesses, households, and hard-hit industries, and economic recovery, Premium pay for essential workers, Investments in water, sewer, and broadband infrastructure.
What is ARPA funding for?
Overview. The American Rescue Plan, signed into law on March 2021, provides $350 billion in funding for state and local governments to build an equitable economic recovery from the devastating economic effects caused by the COVID-19 pandemic.
What is ARPA tax credit?
ANSWER. The ARP made premium tax credits available to eligible taxpayers with household income above 400 percent of the Federal Poverty Line (FPL) and capped how much of household income the family will pay toward the premiums for a benchmark plan at 8.5 percent before premium tax credits apply.
What is not a COBRA qualifying event?
A loss of coverage caused by an event not listed as a triggering event will not result in a right to continuation coverage under COBRA. This includes events such as a change in plan eligibility rules, failure to pay plan premiums, or an employee's decision to voluntarily drop coverage.
What do you do when COBRA ends?
What to Do When COBRA Runs Out. It's important to act quickly if you need health insurance after your COBRA coverage ends. You only have 60 days to enroll in a Health Insurance Marketplace plan under the Special Enrollment Period, starting from the date you lost COBRA coverage.
Why is COBRA so expensive?
COBRA coverage is not cheap.
Why? Because you're now responsible for paying your portion of your health insurance: The cost your employer contributed to your premium, in addition to the 2% service fee on the cost of your insurance.
Is COBRA subsidy ending a qualifying event?
No, stopping payment for COBRA coverage is not considered a qualifying event. Once you choose COBRA, that's your health insurance until another plan has been made available.
Can an employer subsidize a COBRA?
Employers can choose how COBRA subsidies are paid. In some circumstances, employees can pay for their COBRA premiums from their severance payments on a pre-tax basis.
How long does the COBRA subsidy last?
The subsidy is available for 9 months of coverage. The subsidy does not change or extend the overall COBRA continuation coverage, which is usually 18 months from the qualifying event.
What is a subsidized COBRA?
Generally, businesses with 20-plus employees subject to federal COBRA or those who sponsor self-funded group health plans were required to subsidize the health insurance for individuals who lost their employer-sponsored health insurance due to involuntary job loss or reduced hours.
What is an example of subsidized?
Subsidies are a common public policy tool. Examples include free or reduced price meals for schoolchildren, tax abatements for specific businesses, and direct cash payments to Minnesotans turning corn into ethanol. How many states subsidize renewable energy producers?
What does it mean when a company subsidizes your benefits?
Health coverage available at reduced or no cost for people with incomes below certain levels. Examples of subsidized coverage include Medicaid and the Children's Health Insurance Program (CHIP). Marketplace insurance plans with premium tax credits are sometimes known as subsidized coverage too.