Recently, the IRS issued Notice 2021-31 that provides guidance for employers, plan administrators, and health insurers regarding the tax credit available to them under the American Rescue Plan Act of 2021 (ARPA) for providing continuation health coverage to certain individuals under COBRA.
Under ARPA, a 100% COBRA premium subsidy and other COBRA benefits are available to qualifying assistance eligible individuals (AEIs) during the period beginning on April 1, 2021 and ending on September 30, 2021.
Involuntary Termination of Employment Defined
As defined in Notice 2021-31, an involuntary termination of employment is a “severance from employment due to the independent exercise of the unilateral authority of the employer to terminate the employment, other than due to the employee’s implicit or explicit request, where the employee was willing and able to continue performing services.”
The Notice makes it clear that a determination of whether a termination is involuntary is based on all the facts and circumstances and provides the further guidance on what may be considered an involuntary termination of employment:
An employee-initiated termination of employment constitutes an involuntary termination of employment for purposes of COBRA premium assistance if the termination of employment constitutes a termination 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.
An involuntary termination of employment includes a resignation as the result of a material change in the geographic location of employment for the employee.
An involuntary termination of employment includes participation by an employee in a window program under which employees with impending terminations of employment are offered a severance arrangement to terminate employment within a specified period.
In cases of employee absence due to illness or disability, an involuntary termination of employment only occurs if the employer terminates the employment of a worker who is out on disability if there is a reasonable expectation that the worker could have eventually returned to work. However, for purposes of the ARPA subsidy, an employee who is absent from work due to illness or a disability is not considered an involuntary termination.
An involuntary termination of employment generally includes an employer’s decision not to renew an employee’s contract, including for an employee whose employer is a staffing agency.
Retirement is typically not considered to be an involuntary termination of employment. However, if the facts show that an employer would have terminated an employee who was willing and able to continue to work and the employee knew that he or she would be terminated and chose retirement, the retirement could then be considered an involuntary termination of employment.
HBL has experience in all areas of benefits and employment law, offering a comprehensive solution to all your business benefits and HR/employment needs. We help ensure you follow the complex requirements of ERISA and the IRS code, as well as those laws that impact you and your employees. Together, we reduce your exposure to potential legal or financial penalties. Learn more by calling 678-439-6236.
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