Question: Would an employee’s voluntary decision to move to part-time cause them to be eligible for the COBRA subsidy?
Yes. Any reduction in hours that causes an employee to be taken off the plan would trigger COBRA and would also qualify them for a subsidy from April 1st to September 30th.
Under the ARPA rules, an assistance eligible individual (AEI) is one who had an involuntary termination or any reduction of hours that caused a loss of coverage. The guidance gives an example that says someone may be eligible for the subsidy if they have a reduction in hours that causes them to lose eligibility for coverage (i.e., they no longer meet the definition of an eligible participant but they still are an active employee.) The guidance also says that when an employee takes a temporary leave of absence that causes a loss of coverage, but the individual remains an employee at the time the hours were reduced, then they would be eligible for the subsidy in that case.
Neither the ARPA legislation nor the guidance issued by the DOL or IRS specifically lists anything about moving to part-time as being eligible for a subsidy. Instead, a reduction in hours that causes a loss of plan eligibility is what triggers COBRA and also eligibility for the ARPA subsidy between 4/1/21 and 9/30/21. Moving from full-time to part-time constitutes a reduction in hours that would likely cause an employee to be taken off the health plan.
Consider Q/A #1 under IRS Notice 2021-31:
Q-1. Who qualifies as an Assistance Eligible Individual?
A-1. An Assistance Eligible Individual is any individual who is (1) a qualified beneficiary as the result of (A) the reduction of hours of a covered employee’s employment or (B) the involuntary termination of a covered employee’s employment (other than by reason of an employee’s gross misconduct), (2) is eligible for COBRA continuation coverage for some or all of the period beginning on April 1, 2021, through September 30, 2021, and (3) elects the COBRA continuation coverage. This includes qualified beneficiaries who are the spouse or dependent child of the employee who had the reduction in hours or involuntary termination of employment resulting in a loss of coverage, as well as the employee, if that reduction in hours or involuntary termination of employment caused the qualified beneficiary to lose coverage and the other requirements are satisfied.
In addition, IRS Notice 2021-31 clarifies that for a person to be considered an assistance eligible individual, the reduction in hours does not have to be involuntary (unlike a termination of employment).
Q/A #21 states:
Q-21. May a qualified beneficiary whose qualifying event is a voluntary reduction in hours be a potential Assistance Eligible Individual who qualifies for COBRA premium assistance?
A-21. Yes. An employee’s reduction in hours would cause the qualified beneficiary to be a potential Assistance Eligible Individual regardless of whether the reduction in hours is voluntary or involuntary.
It is clear that when an employee moves from full-time to part-time, whether voluntarily or involuntarily, and they remain active but lose coverage under the plan as a result of the reduction in hours, they would likely be an assistance eligible individual under this requirement. Thus, employees who are qualified beneficiaries due to any reduction in hours would be eligible for a subsidy according to the timelines set forth under ARPA.
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