The Internal Revenue Service has issued guidance on tax breaks under the American Rescue Plan Act of 2021, for continuation of health coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA).
The American Rescue Plan provides a temporary, 100% reduction in the premium that individuals would have to pay when they elect COBRA health coverage following a reduction in hours or an involuntary termination of employment.
The new law provides a corresponding tax credit for the entities that maintain group health plans, such as employers, multiemployer plans and insurers.
The reduction in the premium and the credit are also available with respect to coverage under comparable state laws, a.k.a. “mini-COBRA.”
