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July 30, 2021
The Internal Revenue Service (IRS) has issued new COBRA subsidy guidance in Notice 2021-46 (the Notice) which supplements guidance released earlier in Notice 2021-31. The new Notice principally addresses issues related to the process plan sponsors use to recover lost COBRA premium payments through a payroll tax credit.
Employers and plan sponsors will recover missed COBRA premiums through a process of taking a credit against payroll taxes due. However, questions have arisen regarding who is eligible to claim the payroll tax credit when different entities are involved in providing the health plan coverage (e.g., when a plan is set up to offer coverage to employees of multiple employers that are part of a controlled group). The Notice includes 11 questions and answers, 8 of which provide clarification regarding which entity is entitled to collect the premium assistance payroll tax credit.
Clarifying the Entity that May Claim the Payroll Tax Credit
Additional questions address tax credit issues for more limited situations such as employees of state agencies, PEO relationships, and Multiple Employer Welfare Arrangements (MEWAs).
Other Issues Addressed
The Notice can be found at opens in a new windowhttps://www.irs.gov/pub/irs-drop/n-21-46.pdf
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