Tucked into the American Rescue Plan Act of 2021 (Act) are
changes to COBRA administration and notices, and dependent care
assistance plans (DCAP) benefit limits and plan
documentation. While these changes will help individuals
affected by the COVID-19 pandemic, they will also require employer
action to effectuate. Employers should determine how these changes
affect the administration of these benefits, update plan documents,
and provide notices to potentially affected employees and former
employees by May 31, 2021.
COBRA Changes
In order to assist former employees and their families in
maintaining medical coverage, the Act provides for fully paid and
tax-free COBRA coverage for “assistance eligible individuals
(AEIs). An AEI is an individual who is on COBRA coverage due to a
reduction in hours or an involuntary termination of employment
(other than for gross misconduct) as of April 1, 2021. An AEI who
timely elects COBRA will be treated as having paid for
