Bulletin No. 2021–23

HIGHLIGHTS

OF THIS ISSUE





Bulletin No. 2021–23

June 7, 2021

These synopses are intended only as aids to the reader in

identifying the subject matter covered. They may not be

relied upon as authoritative interpretations.

EMPLOYEE PLANS

INCOME TAX

Notice 2021-33, page 1190.

Notice 2021-34, page 1194.

This notice sets forth updates on the corporate bond ­monthly

yield curve, the corresponding spot segment rates for May

2021 used under § 417(e)(3)(D), the 24-month average segment rates applicable for May 2021, and the 30-year Treasury rates, as reflected by the application of § 430(h)(2)(C)

(iv).

EMPLOYEE PLANS, EMPLOYMENT

TAX, EXCISE TAX

This notice provides the applicable reference price for qualified natural gas production from qualified marginal wells

during taxable years beginning in calendar year 2020 for the

purpose of determining the marginal well production credit

under §45I. The applicable reference price for taxable years

beginning in calendar year 2020 is $1.94 per 1,000 cubic

feet. The notice also provides the credit amount used for the

purpose of determining the marginal well production credit.

The credit amount for taxable years beginning in calendar

year 2020 is $0.66 per 1,000 cubic feet.

Notice 2021-31, page 1173.

Rev. Rul. 2021-9, page 1171.

This notice provides guidance on issues relating to the application of § 9501 of the American Rescue Plan Act of

2021 (the ARP), which provides temporary premium assistance for Consolidated Omnibus Budget Reconciliation Act

of 1985 (COBRA) continuation coverage as well as certain

continuation coverage under State laws if the continuation

coverage is the result of a loss of coverage from a reduction in hours or involuntary termination of employment. The

ARP also allows certain individuals a second chance to

elect COBRA continuation coverage with the subsidy beginning April 1 and adds § 6432 to the Code, which provides

a refundable payroll tax credit for an amount equal to the

COBRA premium not paid by the individuals who receive the

premium assistance.

Finding Lists begin on page ii.

Federal rates; adjusted federal rates; adjusted federal longterm rate, and the long-term tax exempt rate. For purposes

of sections 382, 1274, 1288, 7872 and other sections of

the Code, tables set forth the rates for June 2021.

TAX CONVENTIONS

Announcement 2021-11, page 1196.

The Competent Authorities of the United States of America

and Switzerland entered into a Competent Authority Arrangement under paragraph 3 of Article 25 (Mutual Agreement

Procedure) listing U.S. and Swiss pension and retirement arrangements, which now include individual retirement plans,

that may be eligible for an exemption from withholding on

dividends under paragraph 3 of Article 10 (Dividends) provided that all other requirements of the Treaty are satisfied.

The IRS Mission

Provide America’s taxpayers top-quality service by helping

them understand and meet their tax responsibilities and enforce the law with integrity and fairness to all.

Introduction

The Internal Revenue Bulletin is the authoritative instrument

of the Commissioner of Internal Revenue for announcing official rulings and procedures of the Internal Revenue Service

and for publishing Treasury Decisions, Executive Orders, Tax

Conventions, legislation, court decisions, and other items of

general interest. It is published weekly.

It is the policy of the Service to publish in the Bulletin all substantive rulings necessary to promote a uniform application

of the tax laws, including all rulings that supersede, revoke,

modify, or amend any of those previously published in the

Bulletin. All published rulings apply retroactively unless otherwise indicated. Procedures relating solely to matters of internal management are not published; however, statements of

internal practices and procedures that affect the rights and

duties of taxpayers are published.

Revenue rulings represent the conclusions of the Service

on the application of the law to the pivotal facts stated in

the revenue ruling. In those based on positions taken in rulings to taxpayers or technical advice to Service field offices,

identifying details and information of a confidential nature are

deleted to prevent unwarranted invasions of privacy and to

comply with statutory requirements.

Rulings and procedures reported in the Bulletin do not have the

force and effect of Treasury Department Regulations, but they

may be used as precedents. Unpublished rulings will not be

relied on, used, or cited as precedents by Service personnel in

the disposition of other cases. In applying published rulings and

procedures, the effect of subsequent legislation, regulations,

court decisions, rulings, and procedures must be considered,

and Service personnel and others concerned are cautioned

against reaching the same conclusions in other cases unless

the facts and circumstances are substantially the same.

The Bulletin is divided into four parts as follows:

Part I.—1986 Code.

This part includes rulings and decisions based on provisions

of the Internal Revenue Code of 1986.

Part II.—Treaties and Tax Legislation.

This part is divided into two subparts as follows: Subpart A,

Tax Conventions and Other Related Items, and Subpart B,

Legislation and Related Committee Reports.

Part III.—Administrative, Procedural, and Miscellaneous.

To the extent practicable, pertinent cross references to these

subjects are contained in the other Parts and Subparts. Also

included in this part are Bank Secrecy Act Administrative

Rulings. Bank Secrecy Act Administrative Rulings are issued

by the Department of the Treasury’s Office of the Assistant

Secretary (Enforcement).

Part IV.—Items of General Interest.

This part includes notices of proposed rulemakings, disbarment and suspension lists, and announcements.

The last Bulletin for each month includes a cumulative index

for the matters published during the preceding months. These

monthly indexes are cumulated on a semiannual basis, and are

published in the last Bulletin of each semiannual period.

The contents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.

June 7, 2021 

Bulletin No. 2021–23

Part I

Section 1274.—

Determination of Issue

Price in the Case of Certain

Debt Instruments Issued for

Property

(Also Sections 42, 280G, 382, 467, 468, 482, 483,

1288, 7520, 7872.)

Rev. Rul. 2021-9

This revenue ruling provides various prescribed rates for federal income

Annual

AFR

110% AFR

120% AFR

130% AFR

0.13%

0.14%

0.16%

0.17%

AFR

110% AFR

120% AFR

130% AFR

150% AFR

175% AFR

1.02%

1.12%

1.22%

1.33%

1.54%

1.80%

AFR

110% AFR

120% AFR

130% AFR

2.08%

2.29%

2.50%

2.71%

Short-term adjusted AFR

Mid-term adjusted AFR

Long-term adjusted AFR

Bulletin No. 2021–23

tax purposes for June 2021 (the current

month). Table 1 contains the shortterm, mid-term, and long-term applicable federal rates (AFR) for the current

month for purposes of section 1274(d)

of the Internal Revenue Code. Table 2

contains the short-term, mid-term, and

long-term adjusted applicable federal

rates (adjusted AFR) for the current

month for purposes of section 1288(b).

Table 3 sets forth the adjusted federal long-term rate and the long-term

tax-exempt rate described in section

382(f). Table 4 contains the appropri-

ate percentages for determining the

low-income housing credit described in

section 42(b)(1) for buildings placed in

service during the current month. However, under section 42(b)(2), the applicable percentage for non-federally subsidized new buildings placed in service

after July 30, 2008, shall not be less

than 9%. Finally, Table 5 contains the

federal rate for determining the present

value of an annuity, an interest for life

or for a term of years, or a remainder or

a reversionary interest for purposes of

section 7520.

REV. RUL. 2021-9 TABLE 1

Applicable Federal Rates (AFR) for June 2021

Period for Compounding

Semiannual

Quarterly

Short-term

0.13%

0.13%

0.14%

0.14%

0.16%

0.16%

0.17%

0.17%

Mid-term

1.02%

1.02%

1.12%

1.12%

1.22%

1.22%

1.33%

1.33%

1.53%

1.53%

1.79%

1.79%

Long-term

2.07%

2.06%

2.28%

2.27%

2.48%

2.47%

2.69%

2.68%

Annual

0.10%

0.77%

1.58%

REV. RUL. 2021-9 TABLE 2

Adjusted AFR for June 2021

Period for Compounding

Semiannual

0.10%

0.77%

1.57%

1171

Quarterly

0.10%

0.77%

1.57%

Monthly

0.13%

0.14%

0.16%

0.17%

1.02%

1.12%

1.22%

1.33%

1.53%

1.78%

2.06%

2.27%

2.47%

2.68%

Monthly

0.10%

0.77%

1.56%

June 7, 2021

REV. RUL. 2021-9 TABLE 3

Rates Under Section 382 for June 2021

Adjusted federal long-term rate for the current month

Long-term tax-exempt rate for ownership changes during the current month (the highest of

the adjusted federal long-term rates for the current month and the prior two months.)

1.58%

1.64%

REV. RUL. 2021-9 TABLE 4

Appropriate Percentages Under Section 42(b)(1) for June 2021

Note: Under section 42(b)(2), the applicable percentage for non-federally subsidized new buildings placed in service after July

30, 2008, shall not be less than 9%.

Appropriate percentage for the 70% present value low-income housing credit

7.35%

Appropriate percentage for the 30% present value low-income housing credit

3.15%

REV. RUL. 2021-9 TABLE 5

Rate Under Section 7520 for June 2021

Applicable federal rate for determining the present value of an annuity, an interest for life or a

term of years, or a remainder or reversionary interest

Section 42.—Low-Income

Housing Credit

The applicable federal short-term, mid-term,

and long-term rates are set forth for the month of

June 2021. See Rev. Rul. 2021-9, page 1171.

Section 280G.—Golden

Parachute Payments

The applicable federal short-term, mid-term,

and long-term rates are set forth for the month of

June 2021. See Rev. Rul. 2021-9, page 1171.

Section 382.—Limitation

on Net Operating Loss

Carryforwards and

Certain Built-In Losses

Following Ownership

Change

The adjusted applicable federal long-term rate

is set forth for the month of June 2021. See Rev.

Rul. 2021-9, page 1171.

Section 467.—Certain

Payments for the Use of

Property or Services

The applicable federal short-term, mid-term,

and long-term rates are set forth for the month of

June 2021. See Rev. Rul. 2021-9, page 1171.

Section 468.—Special

Rules for Mining and Solid

Waste Reclamation and

Closing Costs

The applicable federal short-term rates are set

forth for the month of June 2021. See Rev. Rul.

2021-9, page 1171.

Section 482.—Allocation

of Income and Deductions

Among Taxpayers

The applicable federal short-term rates are set

forth for the month of June 2021. See Rev. Rul.

2021-9, page 1171.

1.2%

Section 483.—Interest on

Certain Deferred Payments

The applicable federal short-term, mid-term,

and long-term rates are set forth for the month of

June 2021. See Rev. Rul. 2021-9, page 1171.

Section 1288.—Treatment

of Original Issue Discount

on Tax-Exempt Obligations

The adjusted applicable federal short-term, midterm, and long-term rates are set forth for the month of

June 2021. See Rev. Rul. 2021-9, page 1171.

Section 7520.—Valuation

Tables

The applicable federal mid-term rates are set

forth for the month of June 2021. See Rev. Rul.

2021-9, page 1171.

Section 7872.—Treatment

of Loans With BelowMarket Interest Rates

The applicable federal short-term, mid-term,

and long-term rates are set forth for the month of

June 2021. See Rev. Rul. 2021-9, page 1171.

June 7, 2021

1172

Bulletin No. 2021–23

Part III

Premium Assistance for

COBRA Benefits

Notice 2021-31

This notice provides guidance on the

application of § 9501 of the American

Rescue Plan Act of 2021 (the ARP), Pub.

L. 117-2, 135 Stat. 4 (March 11, 2021),

relating to temporary premium assistance

for Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) continuation coverage.1

BACKGROUND

Section 9501 of the ARP – COBRA

Premium Assistance

Section 9501 of the ARP provides for

a temporary 100 percent reduction in the

premium otherwise payable by certain individuals and their families who elect COBRA continuation coverage through the

Internal Revenue Code (Code), the Employee Retirement Income Security Act of

1974 (ERISA), or the Public Health Service Act (PHS Act) due to a loss of coverage as the result of a reduction in hours

or an involuntary termination of employment.2 The temporary premium assistance

is also available to individuals enrolled in

continuation health coverage under State

programs that provide for coverage comparable to COBRA continuation coverage, often referred to as “mini-COBRA.”

In this notice, continuation of health coverage under all of these provisions is referred to as “COBRA continuation coverage,” unless otherwise specified. Also, in

this notice, the temporary premium assistance available under the ARP is referred

to as “COBRA premium assistance” or

“premium assistance,” unless otherwise

specified.

Under § 9501(a)(3) of the ARP, an “Assistance Eligible Individual” is an individual (1) who is a qualified beneficiary with

respect to a period of COBRA continuation coverage during the period from April

1, 2021, through September 30, 2021, and

eligible for that COBRA continuation coverage by reason of a qualifying event specified in § 603(2) of ERISA, § 4980B(f)

(3)(B) of the Code, or § 2203(2) of PHS

Act, except for voluntary termination of

employment, and (2) who elects COBRA

continuation coverage. The ARP requires

that health insurance issuers and group

health plans treat Assistance Eligible Individuals as having paid the full amount of

their COBRA premium for the specified

coverage. The person to whom premiums

for COBRA continuation coverage are

payable (the employer, insurer, or multiemployer plan, as applicable) is entitled to

a refundable tax credit against its share of

Medicare taxes under newly added § 6432

of the Code.3

COBRA premium assistance is available as of the first period of coverage beginning on or after April 1, 2021, and will

not be available for periods of coverage

beginning after September 30, 2021. For

each Assistance Eligible Individual, COBRA premium assistance does not extend

beyond the period of COBRA continuation

coverage in the event that the period ends

prior to September 30, 2021. However,

premium assistance is not available if an

individual is eligible for coverage under

any other group health plan4 or for Medicare. If an individual receiving premium

assistance becomes eligible for coverage

under any other group health plan or for

Medicare, the premium assistance period

ends. An individual receiving premium

assistance who becomes eligible for coverage under any other group health plan or

Medicare is required to notify the group

health plan providing COBRA continuation coverage of eligibility for that other

coverage. If the individual fails to notify

the group health plan, the individual may

be subject to a penalty of $250 for each

failure. If the individual fraudulently fails

to notify the group health plan, the individual is subject to a penalty equal to the

greater of $250 or 110 percent of the premium assistance improperly received after

the end of eligibility for COBRA premium

assistance.

Under § 9501(a)(1)(B) of the ARP, an

employer may allow an Assistance Eligible Individual to elect coverage different

from the coverage under the plan in which

the individual was enrolled before the reduction in hours or involuntary termination of employment, and COBRA premium assistance will apply with respect to

that newly elected coverage.5 The premium for the different coverage option that

is offered may not exceed the premium for

the coverage the individual had before the

reduction in hours or involuntary termination of employment. In addition, the other

coverage offered under this option must be

coverage offered to similarly situated active employees and may not be coverage

that provides only excepted benefits (as

defined in § 9832(c) of the Code, § 733(c)

of ERISA, and § 2971(c) of PHS Act), a

Employer-sponsored health plans generally are required to offer an employee, spouse, or dependent child covered by the plan the opportunity to continue coverage under the plan for a

specified period of time after the occurrence of certain events that otherwise would have terminated the coverage (qualifying events). These continuation of coverage requirements, and

corresponding coverage (if elected), are often referred to as “COBRA continuation coverage” or “COBRA” requirements. The COBRA requirements were enacted originally as part of the

Consolidated Omnibus Budget Reconciliation Act of 1985, Pub. L. 99-272 (April 7, 1986), and are set forth in § 4980B of the Internal Revenue Code.

2

COBRA continuation coverage under the Code, ERISA, and the PHS Act is also referred to in this notice as “Federal COBRA.”

3

Section 6432 was first added to the Code by the American Recovery and Reinvestment Act of 2009, Pub. L. 111-5 (Feb. 17, 2009). It was later stricken by the Tax Technical Corrections Act

of 2018, Pub. L. 115-141 (March 23, 2018). The ARP restores § 6432 to the Code with certain modifications.

4

Eligibility for coverage under any other group health plan does not terminate eligibility for COBRA premium assistance if the other group health plan provides only excepted benefits (as

defined in § 9832(c) of the Code, § 733(c) of ERISA, and § 2971(c) of the PHS Act), is a health flexible spending arrangement (FSA) (as defined by § 106(c)(2) of the Code), or is a qualified small employer health reimbursement arrangement (as defined in § 9831(d)(2) of the Code) (QSEHRA). Whenever reference is made in this notice to the end of eligibility for COBRA

premium assistance due to eligibility for coverage under any other group health plan, coverage under these plans or arrangements is not taken into account. Additionally, eligibility for other

group health plan coverage (that is not an excepted benefit, a health FSA, or a QSEHRA) makes an individual ineligible for COBRA premium assistance even if the offer of other coverage

does not provide minimum value or is not affordable for purposes of the premium tax credit under § 36B.

5

Note that this provision does not modify the general requirement under Federal COBRA that a group health plan must allow a qualified beneficiary to elect to continue the coverage in which

the individual was enrolled as of the qualifying event.

1

Bulletin No. 2021–23

1173

June 7, 2021

health FSA (as defined by § 106(c)(2) of

the Code), or a QSEHRA (as defined in

§ 9831(d)(2) of the Code). If offered the

option to enroll in different coverage, the

Assistance Eligible Individual has 90 days

after the date of the notice of the option

to elect other coverage to elect the other

coverage.

Section 9501(a)(4) of the ARP provides an extended election period for certain individuals who did not have an election of COBRA continuation coverage in

effect on April 1, 2021, referred to in this

notice as the “ARP extended election period.” The ARP extended election period is

available for an individual who would be

an Assistance Eligible Individual if the individual had a COBRA continuation coverage election in effect on April 1, 2021,

or an individual who previously elected

COBRA continuation coverage and discontinued that coverage before April 1,

2021. The ARP extended election period

continues for 60 days after these individuals are provided notice of the extended

election period. The resulting COBRA

continuation coverage does not extend

beyond the maximum period of COBRA

continuation coverage that would have

been required under the applicable COBRA continuation coverage provision if

the individual had elected COBRA continuation coverage initially as required under

that applicable COBRA provision, or had

not discontinued the elected COBRA continuation coverage.

The plan must treat an Assistance Eligible Individual as having paid the full

premium. If the plan does not treat the

Assistance Eligible Individual as having

paid the full premium, the plan will have

failed to meet the applicable continuation

coverage requirements. Thus, in the case

of a plan subject to COBRA continuation

coverage requirements under § 4980B, the

failure to treat the Assistance Eligible Individual as having made the full payment

is a failure to satisfy the requirements of

§ 4980B and may result in the imposition

of the excise tax under § 4980B(b).

Section 6432 of the Code – COBRA

Premium Assistance Credit

The ARP adds § 6432 to the Code,

which provides that the “person to whom

premiums are payable for continuation

June 7, 2021

coverage” is allowed a “premium assistance credit” for each calendar quarter

against the tax imposed by § 3111(b),

or against so much of the taxes imposed

under § 3221(a) as are attributable to

the rate in effect under § 3111(b), of an

amount equal to the premiums not paid by

Assistance Eligible Individuals for COBRA continuation coverage by reason of

§ 9501(a)(1) of the ARP with respect to

that calendar quarter. If, for the calendar

quarter for which the credit is allowed,

the amount of the credit allowed is in

excess of the tax imposed by § 3111(b),

or so much of the taxes imposed under

§ 3221(a) as are attributable to the rate in

effect under § 3111(b), after reduction for

any credits allowed under §§ 3131, 3132,

and 3134, the excess is treated as an overpayment that is refunded under §§ 6402(a)

and 6413(b).

The “person to whom premiums are

payable” is (1) the multiemployer plan, in

the case of a group health plan that is a

multiemployer plan (as defined in § 3(37)

of ERISA); (2) the employer, in the case

of a group health plan, other than a multiemployer plan, that is (a) subject to Federal COBRA, or (b) under which some

or all of the coverage is not provided by

insurance (that is, a plan that is self-funded, in whole or in part); or (3) the insurer

providing the coverage, in the case of any

other group health plan not described in

(1) or (2) (generally, fully insured coverage subject to State continuation coverage

requirements, not Federal COBRA). In

this notice, the “person to whom premiums are payable” is sometimes referred to

as the “premium payee.”

Section 6432(c)(2)(C) provides that

any penalty under § 6656 for any failure

to make a deposit of the tax imposed by

§ 3111(b), or so much of the taxes imposed

under § 3221(a) as are attributable to the

rate in effect under § 3111(b), is waived if

the Secretary of the Treasury determines

that the failure was due to anticipation of

the premium assistance credit. Also, Notice 2021-24, 2021-18 IRB 1122, provides

that the penalty under § 6656 does not apply for any failure to timely deposit employment taxes (withheld income taxes,

taxes under the Federal Insurance Contributions Act (FICA), and taxes under the

Railroad Retirement Tax Act (RRTA)) if

(1) the employer is a person to whom pre-

1174

miums are payable, (2) the amount of employment taxes that the employer does not

timely deposit (after reduction for other

credits) is less than or equal to the amount

of the employer’s anticipated credits under § 6432(a) for the calendar quarter as

of the time of the required deposit, and (3)

the employer did not seek payment of an

advance credit by filing Form 7200 with

respect to the anticipated credits it relied upon to reduce its deposits. Section

6432(f) extends the statute of limitations

for the assessment of any amount attributable to the credit to 5 years after the later

of (1) the date on which the original return

which includes the calendar quarter with

respect to which the credit is determined

is filed, or (2) the date on which that return is treated as filed under § 6501(b)

(2). Finally, § 6432(g) provides that the

Secretary shall issue such regulations, or

other guidance, forms, instructions, and

publications, as may be necessary or appropriate to carry out § 6432, including

“allowing the credit to third-party payers

(including professional employer organizations, certified professional employer

organizations, or agents under § 3504).”

Under § 6432(e), the gross income of

any person allowed the premium assistance credit is increased, for the taxable

year which includes the last day of any

calendar quarter with respect to which the

credit is allowed, by the amount of the

credit. In addition, no credit is allowed

with respect to any amount which is taken into account as qualified wages under

§ 2301 of the Coronavirus Aid, Relief,

and Economic Security Act (CARES Act),

Pub. L. 116-136, 134 Stat. 281 (March

27, 2020), as amended by the Taxpayer

Certainty and Disaster Tax Relief Act of

2020 (Relief Act), which was enacted as

Division EE of the Consolidated Appropriations Act, 2021, Pub. L. 116-260, 134

Stat. 1182 (December 27, 2020), § 3134 of

the Code, or as qualified health plan expenses under §§ 7001(d) or 7003(d) of the

Families First Coronavirus Response Act

(FFCRA), Pub. L. 116-127, 134 Stat. 178

(March 18, 2020), as amended by § 286

of the Relief Act, or §§ 3131 or 3132 of

the Code.

Finally, the amount of any COBRA

premium assistance is excluded from

an individual’s gross income under new

§ 139I of the Code.

Bulletin No. 2021–23

Emergency Relief Notices

QUESTIONS AND ANSWERS

In response to the COVID-19 National Emergency,6 the Departments of Labor

and the Treasury (the Departments) issued

the Extension of Certain Timeframes for

Employee Benefit Plans, Participants, and

Beneficiaries Affected by the COVID-19

Outbreak (Joint Notice) (85 FR 26351,

published May 4, 2020), which provides

extensions of certain timeframes for group

health plans and their participants and

beneficiaries. The Joint Notice provides

that plans must disregard certain periods

beginning March 1, 2020 until 60 days

after the announced end of the National

Emergency or such other date announced

by the Departments (Outbreak Period) in

determining the time by which certain actions must be taken or are permitted to be

completed.

Section 7508A(b) of the Code and

§ 518 of ERISA limit the Departments’

authority to disregard time periods to one

year. As the one-year anniversary of the

Joint Notice approached, the Department

of Labor, with the concurrence of the

Treasury Department, issued EBSA Disaster Relief Notice 2021-01 (February

26, 2021). EBSA Disaster Relief Notice

2021-01 clarifies that disregarded periods under the Joint Notice run until the

earlier of (1) one year from the date the

applicable person was first eligible for

relief, or (2) 60 days after the announced

end of the National Emergency. The Joint

Notice and EBSA Disaster Relief Notice

2021-01 are referred to collectively in

this notice as the “Emergency Relief Notices.”

The periods and dates subject to the

Emergency Relief Notices include, among

others: (1) the 60-day election period for

COBRA continuation coverage under

§ 4980B(f)(5); (2) the date for making

COBRA premium payments pursuant to

§ 4980B(f)(2)(B)(iii) and (C); and (3) the

date for plans to provide a COBRA election notice under § 4980B(f)(6)(D).

The following questions and answers

address many issues that have arisen

with respect to COBRA premium assistance available for COBRA continuation

coverage under the ARP. Generally, the

questions and answers apply for purposes of all COBRA continuation coverage

requirements under the ARP, that is, both

Federal COBRA and comparable State

mini-COBRA requirements. If a question or answer or a particular part of an

answer is applicable only to Federal COBRA, that discussion refers specifically

to Federal COBRA. COBRA premium

assistance requirements apply to the employer or plan sponsor, group health plan,

or issuer, depending on the facts and circumstances. For simplicity, in this notice,

references in the questions and answers to

an “employer” are considered references

to the employer, plan, plan sponsor, group

health plan, or issuer, as applicable to a

particular situation, whereas references to

“common law employer” are references to

the entity that is the employer under the

common law of the Assistance Eligible Individual receiving the COBRA premium

assistance.

ELIGIBILITY FOR COBRA

PREMIUM ASSISTANCE

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.

Q-2. Who qualifies as a qualified beneficiary for purposes of becoming an Assistance Eligible Individual?

A-2. In order to be a qualified beneficiary who is eligible to become an Assistance

Eligible Individual, an individual must (1)

be covered under the group health plan

on the day before the reduction in hours

or involuntary termination of the covered

employee’s employment, and (2) lose eligibility for the coverage due to the reduction in hours or involuntary termination of

the covered employee’s employment.7An

individual who loses group health coverage in connection with the termination of

a covered employee’s employment by reason of the employee’s gross misconduct is

not a qualified beneficiary and, thus, cannot be an Assistance Eligible Individual.

Q-3. Can an individual become an

Assistance Eligible Individual more than

once?

A-3. Yes. An individual who becomes

a qualified beneficiary as the result of a

reduction in hours or involuntary termination of employment, and who otherwise

meets the requirements to be an Assistance Eligible Individual, is treated as an

Assistance Eligible Individual regardless

of whether the individual was also treated

as an Assistance Eligible Individual at an

earlier date.

Example: On April 1, 2021, the individual’s

employment is terminated, and the individual becomes a qualified beneficiary. The individual elects

COBRA continuation coverage and becomes an

Assistance Eligible Individual with COBRA continuation coverage beginning on April 1, the date

the individual lost coverage. On July 1, 2021, the

individual becomes eligible for coverage under a

group health plan sponsored by the employer of the

individual’s spouse and ceases to be an Assistance

On March 13, 2020, the President issued the Proclamation on Declaring a National Emergency Concerning the Novel Coronavirus Disease (COVID-19) Outbreak declaring a national emergency, beginning March 1, 2020, under §§ 201 and 301 of the National Emergencies Act (50 U.S.C. 1601 et seq.). By separate letter, also on March 13, 2020, the President declared under

§ 501(b) of the Robert T. Stafford Disaster Relief and Emergency Assistance Act, 42 U.S.C. § 5121 et seq., that an emergency existed nationwide, as the result of the COVID-19 outbreak (the

COVID-19 National Emergency or National Emergency). See 85 FR 26351, 26352 (May 4, 2020).

7

There are exceptions to this rule in the case of a child born to or adopted by a covered employee during a period of COBRA continuation coverage or in certain circumstances where coverage

was wrongfully denied to the individual (see § 54.4980B-3, Q&A-1).

6

Bulletin No. 2021–23

1175

June 7, 2021

Eligible Individual. The individual ceases COBRA

continuation coverage as of July 1, 2021, and enrolls

in coverage in the group health plan sponsored by

the employer of the individual’s spouse. On August

1, 2021, the individual’s spouse has an involuntary

termination of employment and as a result the individual and spouse lose coverage. The individual and

spouse become qualified beneficiaries due to the loss

of coverage and elect COBRA continuation coverage

with the plan sponsored by the spouse’s employer.

The individual and spouse become Assistance Eligible Individuals with respect to COBRA continuation

coverage as of August 1, 2021.

Q-4. May the employer require individuals to self-certify or attest that they

are eligible for COBRA continuation coverage with COBRA premium assistance

due to a reduction in hours or involuntary

termination of employment and, if so,

may the self-certification or attestation be

used to assist the employer in substantiating its entitlement to the premium assistance credit?

A-4. Yes. Employers may require individuals to provide a self-certification

or attestation regarding their eligibility

status with respect to a reduction in hours

or involuntary termination of employment, which may assist the employer in

substantiating its entitlement to the credit. Employers are not required to obtain

a self-certification or attestation; however, employers who claim the credit must

retain in their records either a self-certification or attestation from the individual

regarding the individual’s eligibility status, or other documentation to substantiate that the individual was eligible for the

COBRA premium assistance (see Q&A-7;

see also Q&A-84).

Q-5. May the employer require individuals to self-certify or attest as to their

eligibility status regarding other disqualifying group health plan coverage or Medicare, and if so, may the self-certification

or attestation be used to assist the employer in substantiating its entitlement to the

premium assistance credit?

A-5. Yes. Employers may require individuals to provide a self-certification or

attestation as to their eligibility status for

other disqualifying group health plan coverage or Medicare, which may assist the

employer in substantiating its entitlement

to the premium assistance credit. Employers are not required to obtain a self-certification or attestation; however, employers who claim the credit must retain in

their records either a self-certification or

June 7, 2021

attestation from the individual regarding

the individual’s eligibility status, or other documentation to substantiate that the

individual was eligible for the COBRA

premium assistance (see Q&A-7; see also

Q&A-84).

Q-6. May an employer rely on an individual’s attestation regarding a reduction

in hours or involuntary termination of employment, or regarding eligibility for other disqualifying coverage, for the purpose

of substantiating eligibility for the premium assistance credit?

A-6. Yes. An employer may rely on an

individual’s attestation regarding a reduction in hours or involuntary termination

of employment, and eligibility for other

disqualifying coverage, for the purpose

of substantiating eligibility for the credit,

unless the employer has actual knowledge

that the individual’s attestation is incorrect.

Q-7. Must an employer keep a record

of an individual’s attestation?

A-7. Yes. If the employer is relying

on an individual’s attestation regarding a

reduction in hours or involuntary termination of employment, or regarding eligibility for other disqualifying coverage,

the employer must keep a record of the

attestation in order to substantiate eligibility for the premium assistance credit.

An employer may rely on other evidence

to substantiate eligibility, such as records

concerning a reduction in hours or involuntary termination of employment.

Q-8. Does a qualifying event other than

a reduction in hours or an involuntary termination of employment qualify an individual for COBRA premium assistance?

A-8. No. Qualifying events other than

a reduction in hours or an involuntary termination of employment, such as divorce

or a covered dependent child ceasing to

be a dependent child under the generally

applicable terms of the plan (such as loss

of dependent status due to aging out of eligibility), are not events qualifying an individual for COBRA premium assistance.

Q-9. If a potential Assistance Eligible

Individual was eligible for other group

health plan coverage before April 1,

2021, but on and after April 1, 2021, has

not been permitted to enroll in that other

group health plan coverage, is COBRA

premium assistance available for the individual’s COBRA continuation coverage?

1176

A-9. Yes. COBRA premium assistance

is available to a potential Assistance Eligible Individual until the individual is

permitted to enroll in coverage under any

other group health plan (including during

a waiting period for any other plan).

Example 1: An individual’s employment was involuntarily terminated and as a result the individual

lost health coverage on October 1, 2020. On November 1, 2020, the individual was eligible to enroll in

the group health plan provided by the employer of

the individual’s spouse as part of that group health

plan’s annual open enrollment period, but the individual did not enroll. The open enrollment period for

the spouse’s group health plan ended December 1,

2020, and the individual has not been permitted to

enroll in coverage under the spouse’s group health

plan at any time on or after April 1, 2021. Under

these facts, the individual is not considered eligible

for coverage under the plan of the spouse’s employer until the first available enrollment period, if any,

that begins on or after April 1, 2021. Therefore, the

individual may elect COBRA continuation coverage

under the plan of the individual’s former employer

during the ARP extended election period and may receive COBRA premium assistance as an Assistance

Eligible Individual under the plan of the individual’s former employer, beginning on or after April 1,

2021.

Example 2: Same facts as Example 1, except that

the spouse’s group health plan has an open enrollment period from June 1, 2021, to June 14, 2021,

with coverage elected during the open enrollment

period beginning July 1, 2021. The spouse does not

elect coverage for the individual under the plan of

the spouse’s employer, and the individual continues

COBRA continuation coverage under the plan of

the individual’s former employer. Under these facts,

COBRA premium assistance is not available for the

individual’s COBRA continuation coverage under

the plan of the individual’s former employer for periods of coverage beginning on or after July 1, 2021

(the date on which the individual was first eligible to

enroll in the group health plan of the spouse’s employer).

Example 3: An individual’s employment was involuntarily terminated and as a result the individual

lost health coverage on October 1, 2020. The individual received a COBRA notice on October 1, 2020.

The individual qualified for a special enrollment

period for loss of coverage under the group health

plan of the spouse’s employer. Under the Emergency Relief Notices, the individual remains eligible to

elect COBRA continuation coverage or enroll in the

spouse’s plan. Additionally, on November 1, 2020,

the individual was eligible to enroll in the spouse’s

plan under that plan’s annual open enrollment period. The open enrollment period for the spouse’s

plan ended December 1, 2020. However, the individual remains eligible to enroll in coverage under

the spouse’s plan under the loss of coverage special

enrollment period due to the Emergency Relief Notices. Under these facts, the individual is considered

eligible for coverage under the plan of the spouse’s

employer due to the special enrollment period for

loss of coverage as extended by the Emergency Relief Notices. Therefore, while the individual could

Bulletin No. 2021–23

elect COBRA continuation coverage from the former

employer’s plan, the individual may not receive COBRA premium assistance as an Assistance Eligible

Individual under the plan of the individual’s former

employer.

Q-10. If a potential Assistance Eligible

Individual does not elect COBRA continuation coverage and enrolls in coverage

under another group health plan, but has

ceased to be covered by the other group

health plan as of April 1, 2021, is COBRA

premium assistance available if the individual elects COBRA continuation coverage under the ARP extended election

period?

A-10. Yes. Enrollment in other group

health plan coverage before electing COBRA continuation coverage does not end

the period of eligibility for COBRA continuation coverage. If the individual is no

longer covered by (or eligible to enroll in)

the other group health plan coverage as

of April 1, 2021, that prior coverage by a

group health plan does not disqualify the

individual from COBRA premium assistance. However, beginning on April 1,

2021, coverage by (or eligibility to enroll

in) another group health plan would disqualify the individual from COBRA premium assistance, even though it does not

end the period of eligibility for COBRA

continuation coverage.

Q-11. If an Assistance Eligible Individual is eligible for other disqualifying

group health plan coverage or Medicare

beginning on or after April 1, 2021, but

does not enroll in either, is COBRA premium assistance available for the individual’s COBRA continuation coverage for

periods of coverage beginning on or after

the date the individual is first eligible for

the other coverage?

A-11. No. (However, if the other coverage for which the individual is eligible

is COBRA continuation coverage, that

coverage will not cause the individual to

be ineligible for the COBRA premium assistance.)

Example 1: An Assistance Eligible Individual

enrolled in COBRA continuation coverage begins

employment with a new employer and is eligible

to enroll in the employer’s group health plan, with

coverage effective the first day of the next month.

The Assistance Eligible Individual declines the coverage and continues COBRA continuation coverage.

Although eligibility for other group health coverage

does not end the individual’s eligibility for Federal

COBRA continuation coverage, eligibility for COBRA premium assistance ends as of the first day of

the next month.

Bulletin No. 2021–23

Example 2: Same facts as Example 1, except

that the new employer’s group health plan imposes

a 2-month waiting period, with coverage starting as

of the first day of the month immediately following

the end of the waiting period. The individual’s eligibility for COBRA premium assistance ends as of

the first day of the month immediately following the

end of the waiting period, even though the individual

declined coverage under the new employer’s group

health plan. The result is the same if the individual

enrolls in the new employer’s group health plan; the

individual is not eligible for COBRA premium assistance as of the first day of the month immediately

following the end of the waiting period.

Example 3: Two Assistance Eligible Individuals

who are spouses are enrolled in COBRA continuation coverage. One spouse begins employment with

a new employer and is eligible to enroll in the employer’s group health plan with self-only or family

coverage, with coverage effective the first day of the

next month. That spouse enrolls in self-only coverage, and the other spouse continues COBRA continuation coverage. Although the individual is allowed

to continue Federal COBRA continuation coverage,

the individual is no longer eligible for COBRA premium assistance as of the first day of the next month

because the individual is eligible for coverage under

the group health plan of the spouse’s employer.

Q-12. Is an individual currently enrolled in Medicare who is a qualified

beneficiary as the result of a reduction in

hours or involuntary termination of employment able to elect COBRA continuation coverage and receive COBRA premium assistance?

A-12. No. An individual currently enrolled in Medicare who becomes a qualified beneficiary as the result of a reduction

in hours or involuntary termination of employment may be eligible to elect COBRA

continuation coverage but is not eligible

for COBRA premium assistance.

Q-13. Is an individual who is a qualified beneficiary as the result of a reduction in hours or involuntary termination of

employment but who is currently enrolled

in individual health insurance coverage

through a Health Insurance Exchange eligible to elect COBRA continuation coverage and receive COBRA premium assistance?

A-13. Yes. An individual who is a qualified beneficiary as the result of a reduction in hours or involuntary termination of

employment but who is currently enrolled

in individual health insurance coverage

through a Health Insurance Exchange may

be eligible to elect COBRA continuation

coverage and for COBRA premium assistance. However, an individual is not eligible for a premium tax credit to help pay

for the cost of Exchange coverage during

1177

any month that the individual is enrolled

in COBRA continuation coverage. An individual who elects COBRA continuation

coverage (with or without COBRA premium assistance) and who is enrolled in

coverage through a Health Insurance Exchange with advance payments of the premium tax credit (APTC) may be required

to repay the APTC for the overlap months.

See Q&A-44 for information regarding

the waiver of COBRA continuation coverage, which may assist individuals in this

situation.

Q-14. Does a reduction in hours or involuntary termination of employment that

follows an earlier qualifying event, such

as a divorce, make the qualified beneficiary from the first qualifying event a potential Assistance Eligible Individual?

A-14. No. If COBRA continuation

coverage is based on a qualifying event

other than a reduction in hours or involuntary termination of employment, the later

reduction in hours or involuntary termination of employment of the employee does

not cause a loss of coverage, and the qualified beneficiary therefore does not become

a potential Assistance Eligible Individual.

Example: An employee is divorced and the divorce results in a loss of health coverage for the

spouse of the employee (but not the employee) on

November 1, 2020. The spouse is eligible for and

timely elects COBRA continuation coverage. On

December 1, 2020, the employee’s employment is

involuntarily terminated and, as a result, the employee loses health coverage. The employee elects

COBRA continuation coverage that begins December 1, 2020. The spouse is not an Assistance Eligible

Individual because the qualifying event with respect

to the spouse’s COBRA continuation coverage is

the divorce, rather than the employee’s involuntary

termination of employment. Moreover, the employee’s involuntary termination of employment is not a

qualifying event for the spouse. The employee is an

Assistance Eligible Individual, however, because the

qualifying event with respect to the employee is the

involuntary termination of employment.

Q-15. If, as the result of an involuntary

termination of employment, an individual

loses coverage under a health plan that is

not subject to COBRA continuation coverage requirements (as defined under the

ARP) and the individual is then offered

and elects continuation coverage provided

voluntarily by the employer, is COBRA

premium assistance available with respect

to that continuation coverage?

A-15. No. In order for COBRA premium assistance and the related premium assistance credit to be available, the

June 7, 2021

plan must be subject to COBRA continuation coverage requirements as defined

under the ARP. Examples of health plans

that may not be subject to either Federal

COBRA or State mini-COBRA include

a self-insured church plan or a small employer plan. (Treas. Reg. § 54.4980B-2,

Q&A-5 provides that a small-employer

plan excluded from Federal COBRA is a

group health plan maintained by an employer that normally employed fewer than

20 employees during the preceding calendar year.)

Q-16. Is COBRA premium assistance

available with respect to temporary continuation coverage elected under the Federal Employees Health Benefits (FEHB)

program pursuant to 5 U.S. Code § 8905a

by an individual who lost coverage due to

a reduction in hours or an involuntary termination of employment?

A-16. No. Continuation coverage

elected under the FEHB program pursuant to 5 U.S. Code § 8905a is not COBRA

continuation coverage for purposes of

§ 9501 of the ARP and so COBRA premium assistance is not available with respect

to that coverage.

Q-17. Is COBRA premium assistance

available to individuals who have elected

and remained on COBRA continuation

coverage for an extended period due to

a disability determination, second qualifying event, or an extension under State

mini-COBRA, to the extent those additional periods of coverage fall between

April 1, 2021, and September 30, 2021, if

the original qualifying event was a reduction in hours or an involuntary termination

of employment?

A-17. Yes. If the original qualifying

event was a reduction in hours or an involuntary termination of employment,

COBRA premium assistance is available

to individuals who have elected and remained on COBRA continuation coverage

for an extended period due to a disability

determination, second qualifying event, or

an extension under State mini-COBRA, to

the extent the additional periods of coverage fall between April 1, 2021, and September 30, 2021.

Q-18. If retiree health coverage (that

is not COBRA continuation coverage) is

offered to a potential Assistance Eligible

Individual, how does that offer affect eligibility for COBRA premium assistance?

June 7, 2021

A-18. The effect on eligibility for

COBRA premium assistance depends on

whether the retiree health coverage is offered under the same group health plan

as the COBRA continuation coverage or

under a separate group health plan. If offered under the same group health plan,

the offer of the retiree health coverage has

no effect on a potential Assistance Eligible

Individual’s eligibility for COBRA premium assistance under the ARP. However,

a potential Assistance Eligible Individual

is not eligible for COBRA premium assistance if the individual is offered retiree

health coverage that is not COBRA continuation coverage and is coverage under

a separate group health plan than the plan

under which the COBRA continuation

coverage is offered.

The COBRA regulations provide rules

for determining whether health benefits

provided by an employer or employee organization constitute one or more

group health plans for purposes of Federal

COBRA. See Treas. Reg. § 54.4980B2, Q&A-6. Under those rules, all health

benefits provided by an organization

constitute a single group health plan unless it is clear from the instruments governing the arrangement or arrangements

that the benefits are being provided under

separate plans, and the arrangement or arrangements are operated pursuant to such

instruments as separate plans. (See Q&A36 for more information regarding retiree

health coverage.)

Q-19. Does COBRA premium assistance apply to portions of the premium

attributable to COBRA continuation coverage for individuals who are not qualified

beneficiaries?

A-19. No. COBRA premium assistance is limited to premiums attributable

to COBRA continuation coverage for Assistance Eligible Individuals. For purposes of Federal COBRA, a qualified beneficiary with respect to a covered employee

under a group health plan is the spouse of

the employee or a dependent child of the

employee if the spouse or dependent child

was a beneficiary under the plan on the

day before the qualifying event. A child

who is born to or adopted by the covered

employee during the period of COBRA

continuation coverage may also be a qualified beneficiary. Otherwise, a spouse or

dependent child who was not a benefi-

1178

ciary under the plan before the qualifying

event is not a qualified beneficiary. In addition, if an individual does not meet the

definition of a qualified beneficiary under

Federal COBRA, the individual’s coverage is not eligible for COBRA premium

assistance, even though the individual

may continue to be covered or be eligible

to continue coverage under a plan by its

terms, or as required by State law. (If there

are additional individuals enrolled in COBRA continuation coverage who are ineligible for COBRA premium assistance, see

Q&A-68 for information regarding calculation of the premium assistance credit.)

Q-20. If an individual makes or owes

COBRA premium payments for retroactive COBRA continuation coverage elected under the Emergency Relief Notices

for which the payment due date has been

extended, does that make the individual

ineligible for premium assistance?

A-20. No. If an individual elected retroactive COBRA continuation coverage

under the Emergency Relief Notices, neither making nor owing COBRA premium

payments for retroactive COBRA continuation coverage for which the payment due

date has been extended makes an individual ineligible for COBRA premium assistance. However, an individual may lose

retroactive COBRA continuation coverage (as noted in Q&A-58) for the months

for which the premium is not timely paid

under the Emergency Relief Notices. Any

late or unpaid premiums for retroactive

COBRA continuation coverage will not

affect an individual’s eligibility for COBRA premium assistance.

REDUCTION IN HOURS

Q&A-21 through Q&A-23 apply solely

for purposes of determining whether there

is a reduction in hours under § 9501 of the

ARP and § 6432 of the Code, and other

provisions of the Code added or amended

by § 9501 of the ARP, but not for any other purposes of the Code or any other law.

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 In-

Bulletin No. 2021–23

dividual regardless of whether the reduction in hours is voluntary or involuntary.

Q-22. Is a qualified beneficiary whose

qualifying event is a furlough a potential

Assistance Eligible Individual who qualifies for COBRA premium assistance?

A-22. Yes. In this notice, the term “furlough” means a temporary loss of employment or complete reduction in hours

with a reasonable expectation of return to

employment or resumption of hours (for

example, due to an expected business recovery of the employer) such that the employer and employee intend to maintain

the employment relationship. A furlough

may be a reduction in hours regardless of

whether the employer initiated the furlough, or the individual participated in a

furlough process analogous to a window

program (see Q&A-29).

Q-23. Does a reduction in hours include a work stoppage as the result of a

lawful strike initiated by employees or

their representatives or a lockout initiated

by the employer?

A-23. Yes. A reduction in hours includes a work stoppage, either as the result of a lawful strike initiated by employees or their representatives or a lockout

initiated by the employer, as long as at

the time the work stoppage or the lawful

strike commences the employer and employee intend to maintain the employment

relationship.

INVOLUNTARY TERMINATION OF

EMPLOYMENT

Q&A-24 through Q&A-34 apply solely

for purposes of determining whether there

is an involuntary termination of employment under § 9501 of the ARP and § 6432

of the Code, and other provisions of the

Code added or amended by § 9501 of the

ARP, but not for any other purposes under

the Code or any other law.

Q-24. What circumstances constitute

an involuntary termination of employment

for purposes of the definition of an Assistance Eligible Individual?

A-24. An involuntary termination of

employment means 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

Bulletin No. 2021–23

and able to continue performing services.

For application of the involuntary termination of employment standard with respect

to the failure to renew an employment

agreement or similar contract, see Q&A34. In addition, 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.

The determination of whether a termination is involuntary is based on the facts

and circumstances. For example, if a termination is designated as voluntary or as a

resignation, but the facts and circumstances indicate that the employee was willing

and able to continue performing services,

so that, absent the voluntary termination,

the employer would have terminated the

employee’s services, and that the employee had knowledge that the employee

would be terminated, the termination is

involuntary.

Q-25. Does involuntary termination of

employment include an employer’s action

to end an individual’s employment while

the individual is absent from work due to

illness or disability, if that action would

otherwise constitute an involuntary termination of employment?

A-25. Yes. Involuntary termination of

employment occurs when the employer

takes action to terminate the individual’s

employment, if before the action there is a

reasonable expectation that the employee

will return to work after the illness or disability has subsided. However, mere absence from work due to illness or disability before the employer has taken action

to end the individual’s employment is not

an involuntary termination of employment

(see Q&A-32). Whether the absence from

work is a reduction in hours potentially

resulting in COBRA continuation coverage depends on whether the absence from

work results in a loss of coverage.

Q-26. Does an involuntary termination

of employment include retirement?

A-26. Generally, no. In general, a retirement is a voluntary termination of

employment. However, if the facts and

circumstances indicate that, absent retire-

1179

ment, the employer would have terminated the employee’s employment, that the

employee was willing and able to continue employment, and that the employee

had knowledge that the employee would

be terminated absent the retirement, the

retirement is an involuntary termination

of employment.

Q-27. Does involuntary termination of

employment include involuntary termination of employment for cause?

A-27. Yes. However, if the termination

of employment is due to gross misconduct

of the employee, the termination is not a

qualifying event and the loss of the health

coverage of the employee and other family members by reason of the employee’s

termination of employment does not lead

to eligibility for COBRA continuation

coverage. Therefore, the loss of coverage

due to a termination of employment for

gross misconduct will not result in an individual becoming a potential Assistance

Eligible Individual.

Q-28. Does an involuntary termination

of employment include a resignation as

the result of a material change in the geographic location of employment for the

employee?

A-28. Yes.

Q-29. Does an involuntary termination

of employment include 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 of time (the

“window”)?

A-29. Yes. An involuntary termination

of employment includes participation in a

window program that meets the requirements of Treas. Reg. § 31.3121(v)(2)-1(b)

(4)(v). See those regulations for further

information including certain time limits

applicable to the window and limits on the

ability to have successive windows.

Q-30. Does an involuntary termination

of employment occur because the termination of employment is for “good reason” if

an employee terminates employment because of concerns about workplace safety

due to a health condition of the employee

or a family member of the employee?

A-30. In general, an employee’s termination of employment due to general concerns about workplace safety is not treated

as an involuntary termination of employ-

June 7, 2021

ment. However, a termination of employment would be involuntary if the employee can demonstrate that the employer’s

actions (or inactions) resulted in a material negative change in the employment

relationship analogous to a constructive

discharge. A departure due to the personal

circumstances of the employee unrelated

to an action or inaction of the employer,

such as a health condition of the employee or a family member, inability to locate

daycare, or other similar issues, generally

will not rise to the level of being analogous to a constructive discharge absent the

employer’s failure to either take a required

action or provide a reasonable accommodation.

Q-31. Is an individual whose qualifying event is an employee-initiated termination of employment because a child is

unable to attend school or because another childcare facility is closed due to the

COVID-19 National Emergency a potential Assistance Eligible Individual?

A-31. No. However, if the individual

maintains the ability to return to work, and

the facts and circumstances indicate that

the qualifying event is a temporary leave

of absence such that the employer and

employee intend to maintain the employment relationship, the qualifying event is

a voluntary reduction in hours and the individual would be a potential Assistance

Eligible Individual.

Q-32. Does an involuntary termination

of employment include a termination of

employment initiated by the employee in

response to an involuntary material reduction in hours that did not result in a loss of

coverage?

A-32. Yes. For purposes of COBRA

premium assistance, an employee-initiated termination of employment in response

to an involuntary material reduction in

hours is treated as a termination for good

reason. Thus, an employee-initiated termination of employment due to an involuntary material reduction in hours would be

an involuntary termination of employment

for purposes of COBRA premium assistance.

Q-33. Is the death of an employee an

involuntary termination of employment

that makes qualified beneficiaries such as

the spouse and dependent children of the

employee potential Assistance Eligible Individuals?

June 7, 2021

A-33. No. The death of an employee

is not a reduction in hours or an involuntary termination of employment, so a loss

of coverage due to the employee’s death

would not result in the spouse and dependent children of the employee being potential Assistance Eligible Individuals.

Q-34. Does an involuntary termination

of employment include an employer’s

decision not to renew an employee’s contract, including for an employee whose

employer is a staffing agency?

A-34. Generally, yes. An employer’s

decision not to renew an employee’s contract will be considered an involuntary termination of employment if the employee

was otherwise willing and able to continue the employment relationship and was

willing either to execute a contract with

terms similar to those of the expiring contract or to continue employment without

a contract. However, if the parties understood at the time they entered into the

expiring contract, and at all times when

services were being performed, that the

contract was for specified services over

a set term and would not be renewed, the

completion of the contract without it being renewed is not an involuntary termination of employment.

COVERAGE ELIGIBLE FOR

COBRA PREMIUM ASSISTANCE

Q-35. Is COBRA premium assistance

available for COBRA continuation coverage under a vision-only or dental-only

plan?

A-35. Yes. COBRA premium assistance is available for COBRA continuation

coverage of any group health plan, except

a health FSA under § 106(c) offered under

a § 125 cafeteria plan. Group health plans

include vision-only and dental-only plans,

regardless of whether the employer pays

for a portion of the premiums for active

employees. COBRA premium assistance

is not available for continuation coverage

offered by employers for non-health benefits that are not subject to Federal COBRA continuation coverage requirements,

such as group-term life insurance. (See

Q&A-55 regarding eligibility for COBRA

continuation coverage for distinct benefit

options).

Q-36. May retiree health coverage be

treated as COBRA continuation coverage

1180

for which COBRA premium assistance is

available?

A-36. Yes, but only if the retiree coverage is offered under the same group health

plan as the coverage made available

to similarly situated active employees,

though the amount charged for the retiree

coverage may be higher than that charged

to active employees. In that case, the retiree coverage may still be eligible for the

COBRA premium assistance as long as

the amount charged to a retiree does not

exceed the maximum amount allowed under Federal COBRA.

Q-37. Is COBRA premium assistance

available for COBRA continuation coverage under a health reimbursement arrangement (HRA)?

A-37. Yes. Note that, for purposes of the

ARP, COBRA continuation coverage does

not include a health FSA provided through

a § 125 cafeteria plan paid for with salary

reduction amounts. Even though, under

some circumstances, an HRA may qualify

as a health FSA under § 106(c)(2), such

an HRA would not be excluded from the

ARP’s definition of COBRA continuation

coverage because the HRA would be paid

for with employer contributions, not salary reduction amounts contributed through

a § 125 cafeteria plan.

Q-38. Does eligibility for coverage

under an HRA end the period of COBRA

premium assistance under the ARP in the

same way as eligibility for coverage under

any other group health plan?

A-38. Yes, unless the HRA qualifies

as a health FSA under § 106(c)(2). Under § 106(c)(2)(B), a health FSA is health

coverage under which the maximum

amount of reimbursement that is reasonably available to a participant for the

coverage is less than 500 percent of the

value of the coverage. For this purpose,

the maximum amount of reimbursement

that is reasonably available generally

would be the balance of the HRA, and

the value of the HRA coverage generally would be the applicable premium for

COBRA continuation of the HRA coverage, not taking into account COBRA premium assistance.

Q-39. Is COBRA premium assistance

available for COBRA continuation coverage under an HRA integrated with individual health insurance coverage (an individual coverage HRA)?

Bulletin No. 2021–23

A-39. Yes. In the case of an individual

coverage HRA, the COBRA continuation

coverage applies only to the individual

coverage HRA and not to the underlying

individual health insurance coverage. The

qualified beneficiary with COBRA continuation coverage must still incur and substantiate covered medical care expenses

(which may include health insurance premiums) to be reimbursed by the individual coverage HRA. Although an individual

coverage HRA may include an HRA integrated with Medicare, a qualified beneficiary eligible for Medicare cannot be

an Assistance Eligible Individual; thus,

COBRA premium assistance is not available if the COBRA continuation coverage

is under an individual coverage HRA integrated with Medicare. (See Q&A-70

regarding the calculation of the premium

assistance credit in the case of an individual coverage HRA.)

Q-40. Is COBRA premium assistance

available for coverage under a QSEHRA

as defined in § 9831(d)?

A-40. No. A QSEHRA is not a group

health plan eligible for COBRA continuation coverage.

Q-41. Pursuant to § 9501(a)(1)(B) of

the ARP, a plan sponsor allows an Assistance Eligible Individual to enroll in

coverage under a plan that is different

than the coverage the individual was

enrolled in at the time of the qualifying

event. Does the requirement that the premium for the different coverage elected

not exceed the premium for coverage that

the individual was enrolled in at the time

of the qualifying event simply limit the

amount of the COBRA premium assistance, thereby allowing the individual to

elect a plan with a higher premium but restricting the amount of COBRA premium

assistance to the amount of the premium

for the coverage that the individual was

enrolled in at the time of the qualifying

event (with the individual or employer

paying the excess over the COBRA premium assistance)?

A-41. No. Unless otherwise allowed

under the COBRA regulations or other

applicable law, coverage with a premium

greater than the premium for the coverage

that the individual was enrolled in at the

time of the qualifying event is not eligible for the COBRA premium assistance.

However, the requirements in § 9501(a)

Bulletin No. 2021–23

(1)(B) of ARP do not apply to a situation

in which the plan in which the individual

was enrolled at the time of the qualifying

event is not available (see Q&A-42).

Example: An individual is an Assistance Eligible Individual who was enrolled in a plan with an

$800 per month COBRA premium at the time of the

qualifying event. The employer sponsoring the plan

permits Assistance Eligible Individuals to enroll in

other coverage pursuant to § 9501(a)(1)(B) of the

ARP. Three other coverages are offered to active employees similarly situated to the individual, none of

which are excepted benefits, a QSEHRA or a health

FSA. The COBRA premiums for the other coverages

are $700, $750 or $1,000 per month. The individual

may enroll in the $700 or $750 per month options

with COBRA premium assistance. If the employer

allows, the individual may enroll in the $1,000 per

month coverage option but that coverage will not be

eligible for the COBRA premium assistance. (But

see Q&A-69 regarding the availability of COBRA

premium assistance for an Assistance Eligible Individual electing a different benefit package in compliance with § 54.4980B-8, Q&A-2(c), such as during

open enrollment.)

Q-42. If a potential Assistance Eligible Individual elects COBRA continuation coverage during the ARP extended

election period but the employer no longer offers the health plan that previously

covered the individual, must the employer

place that individual in the plan most similar to the prior plan, provided the employer offers other health plans?

A-42. Yes. If an employer no longer

offers the health plan that previously covered the potential Assistance Eligible Individual, the individual must be offered the

opportunity to elect the plan that a similarly situated active employee would have

been offered that is most similar to the

previous plan that covered the individual,

even if the premium for the plan is greater

than the premium for the previous plan.

In this case, the other coverage elected by

the individual is eligible for the COBRA

premium assistance, regardless of the premium for that coverage.

BEGINNING OF COBRA PREMIUM

ASSISTANCE PERIOD

Q-43. When is an Assistance Eligible

Individual first entitled to receive COBRA

premium assistance?

A-43. An Assistance Eligible Individual is entitled to receive COBRA premium

assistance as of the first applicable period

of coverage beginning on or after April 1,

2021. For this purpose, a period of cov-

1181

erage is a monthly or shorter period with

respect to which premiums are normally

charged by the plan or issuer with respect

to such coverage provided to employees

and qualified beneficiaries. The start date

of the first period of coverage beginning

on or after April 1, 2021, depends on the

period with respect to which premiums

would have been normally charged by the

plan if the individual had paid the premium.

Example: Plan provides that employees and qualified beneficiaries pay premiums for health coverage,

including COBRA continuation coverage, on a biweekly basis for a corresponding two-week period

of coverage. For March 2021, the last two-week period of coverage is from March 28 through April 10,

2021, followed by a period of coverage from April

11 through April 24, 2021. COBRA premium assistance could apply with respect to the premium for the

period of coverage beginning April 11, 2021.

Q-44. Must an Assistance Eligible Individual electing COBRA continuation

coverage under the ARP extended election

period begin coverage as of the first period

of coverage beginning on or after April 1,

2021?

A-44. No. While a group health plan

must make COBRA continuation coverage with COBRA premium assistance

available as of the first period of coverage

beginning on or after April 1, 2021, in the

case of an Assistance Eligible Individual

electing COBRA continuation coverage

under the ARP extended election period,

the Assistance Eligible Individual may

waive COBRA continuation coverage for

any period before electing to receive COBRA premium assistance, including retroactive periods of coverage beginning prior

to April 1, 2021.

Example: An individual’s employment was involuntarily terminated and as a result the individual

lost health coverage on October 1, 2020. The individual received the COBRA election notice on October 1, 2020. The individual enrolls in an individual

health insurance policy on the Health Insurance Exchange, effective on November 1, 2020. The individual receives the notice of the ARP extended election

period on May 1, 2021. At that time, the individual is

not eligible to enroll in any other group health plan

or Medicare. The individual may elect COBRA continuation coverage either retroactively to October 1,

2020, retroactively to April 1, 2021, or prospectively. The individual elects COBRA continuation coverage prospectively from June 1, 2021, and contacts

the Health Insurance Exchange to end the Exchange

health insurance policy as of May 31, 2021. The individual is an Assistance Eligible Individual as of

June 1, 2021. Because there is no overlapping coverage, the individual is not required to repay any APTC

when the individual files his or her 2021 tax return.

June 7, 2021

Q-45. If an employer is no longer subject to Federal COBRA due to a reduction

in the number of employees, is the employer still required to provide the ARP

extended election period to individuals

who had a qualifying event that was a

reduction in hours or involuntary termination of employment while the employer was subject to COBRA, and are those

qualified beneficiaries potential Assistance Eligible Individuals?

A-45. Yes. Whether a qualified beneficiary is eligible to elect Federal COBRA

continuation coverage is determined by

the employer’s status at the time of the

qualifying event, and whether a qualified

beneficiary is a potential Assistance Eligible Individual who may elect COBRA

continuation coverage during the ARP

extended election period is determined by

whether the qualified beneficiary was eligible to elect COBRA continuation coverage at the time of the qualifying event.

Example: Based on the number of employees

from the preceding calendar year, an employer is not

a small employer for the 2020 calendar year, but is a

small employer for calendar year 2021. As a result,

Federal COBRA requirements apply to the employer

for calendar year 2020 but not calendar year 2021.

An individual has a qualifying event that is an involuntary termination of employment in November of

2020. Because the qualified beneficiary’s qualifying

event occurred during the 2020 calendar year when

the employer was not a small employer and the plan

was subject to Federal COBRA requirements, the

employer is required to provide the ARP extended

election period and the qualified beneficiary is eligible to elect Federal COBRA continuation coverage

with COBRA premium assistance.

Q-46. Is COBRA premium assistance

available for periods of coverage from

April 1, 2021, through September 30,

2021, if the election for COBRA continuation coverage is made after September

30, 2021?

A-46. Yes, but only if the individual

makes the election within the applicable

60-day election period. A qualified beneficiary who is a potential Assistance Eligible Individual has 60 days to elect COBRA continuation coverage after being

provided either the general notice under

§ 9501(a)(5)(A) of the ARP (for a qualifying event after April 1, 2021), or the notice

regarding the ARP extended election period under § 9501(a)(5)(C) (with respect to

a qualifying event before April 1, 2021).

If the individual makes the COBRA election after September 30, 2021, but within the applicable 60-day period, then the

June 7, 2021

individual is entitled to COBRA premium

assistance through the earlier of the last

period of coverage beginning on or before

September 30, 2021, or the date that COBRA continuation coverage expires. COBRA premium assistance would start with

the later of the first period of coverage beginning on or after April 1, the date of the

qualifying event, or the date the qualified

beneficiary elects to begin COBRA continuation coverage.

END OF COBRA PREMIUM

ASSISTANCE PERIOD

Q-47. For how long is COBRA premium assistance available to an Assistance

Eligible Individual?

A-47. COBRA premium assistance

applies until the earliest of (1) the first

date the Assistance Eligible Individual

becomes eligible for other group health

plan coverage (with certain exceptions)

or Medicare coverage, (2) the date the individual ceases to be eligible for COBRA

continuation coverage, or (3) the end of

the last period of coverage beginning on

or before September 30, 2021.

Example: A plan provides that employees and

qualified beneficiaries pay premiums for health coverage, including COBRA continuation coverage,

on a biweekly basis for a corresponding two-week

period of coverage. For September 2021, the last

two-week period of coverage is from September 19

through October 2, 2021. COBRA premium assistance would apply with respect to the entire period

of coverage beginning September 19, even though

the period of coverage includes coverage for October

1 and October 2, 2021.

Q-48. Once subsidized COBRA continuation coverage ends with the period of

coverage including September 30, 2021,

does coverage for a qualified beneficiary

who was an Assistance Eligible Individual

automatically continue with unsubsidized

COBRA and, if so, when is the payment

for the first subsequent period of coverage

due?

A-48. COBRA continuation coverage

automatically continues, and the payment for the first period of coverage after September 30, 2021 will be timely if

paid according to the terms of the plan or

coverage, subject to applicable COBRA

continuation coverage requirements taking into account the Emergency Relief

Notices.

Q-49. What are the consequences if an

Assistance Eligible Individual fails to pro-

1182

vide notice that the individual is no longer

eligible for COBRA premium assistance

due to eligibility for coverage under another group health plan or Medicare?

A-49. An Assistance Eligible Individual who fails to provide notice may be

subject to a Federal tax penalty of $250

for each failure to notify the employer,

plan, or issuer. If the failure to provide

notice is fraudulent, the penalty will be

the greater of $250 or 110 percent of the

COBRA premium assistance improperly

received. The penalty will not apply if the

individual’s failure to provide notice was

due to reasonable cause and not to willful

neglect. The employer, plan, or issuer who

received the premium assistance credit in

the amount of the excess COBRA premium assistance has no right to the penalty

payment.

Q-50. Does the death of an employee

who has had a reduction in hours or involuntary termination of employment end

the eligibility for COBRA premium assistance of any qualified beneficiary spouse

and dependent children?

A-50. No.

EXTENDED ELECTION PERIOD

Q&A-51 through Q&A-55 apply only

for purposes of Federal COBRA, unless

the Q&A indicates otherwise.

Q-51. If an employee had a reduction

in hours or an involuntary termination

of employment before April 1, 2021 and

elected self-only COBRA continuation

coverage, may a spouse or a dependent

child who is a qualified beneficiary in

connection with the reduction in hours or

involuntary termination of employment

elect COBRA continuation coverage and

receive COBRA premium assistance under the ARP extended election period?

A-51. Yes. A qualified beneficiary who

does not have an election of COBRA continuation coverage in effect on April 1,

2021, but who would have been an Assistance Eligible Individual if the election

were in effect, may elect COBRA continuation coverage under the ARP extended

election period. A spouse or dependent

child who is a beneficiary under a group

health plan that covers an employee on the

day before the reduction in hours or involuntary termination of employment of the

employee also would have been an Assis-

Bulletin No. 2021–23

tance Eligible Individual if the spouse or

dependent child had elected COBRA continuation coverage. Thus, a spouse or dependent child in this situation has a second

election opportunity, notwithstanding the

prior election of self-only COBRA continuation coverage by the employee.

Q-52. Is the ARP extended election period available to an individual if the continuation coverage is provided only under

State law (and not Federal COBRA)?

A-52. No. The ARP extended election

period under § 9501(a)(4)(A) applies

only to a group health plan that is subject

to Federal COBRA. It does not apply to

plans subject to continuation coverage

requirements under a State program that

provides comparable continuation coverage. However, if a State law or program

provides for a similar extended election

right and an individual otherwise satisfies the requirements to be an Assistance

Eligible Individual, COBRA premium assistance is available for any resulting period of COBRA continuation coverage for

periods of coverage from April 1, 2021,

through September 30, 2021.

Q-53. May a potential Assistance Eligible Individual whose qualifying event occurred before April 1, 2021, who still has

an open COBRA continuation coverage

election period independent of the ARP

(including an extended period for electing coverage under the Emergency Relief

Notices), elect COBRA continuation coverage under the ARP extended election

period and receive COBRA continuation

coverage with COBRA premium assistance that starts with a period of coverage

beginning only on or after April 1, 2021?

A-53. Yes. The extended election period for electing COBRA continuation

coverage is available for a potential Assistance Eligible Individual if the qualifying event occurred before April 1,

2021, and if the individual has not yet

elected COBRA continuation coverage,

including for an individual who has an

open COBRA election period as of April

1, 2021. If the individual elects retroactive COBRA continuation coverage under the original COBRA election period

available prior to the ARP extended election period under Federal COBRA, COBRA continuation coverage is retroactive

to that individual’s loss of coverage. COBRA premium assistance, however, does

Bulletin No. 2021–23

not apply to periods of coverage prior to

the first period of coverage beginning on

or after April 1, 2021.

Example: An individual is involuntarily terminated from employment on December 15, 2020 and

receives the COBRA election notice on January 4,

2021. As of April 1, 2021, the individual has not

elected COBRA continuation coverage. The individual must receive a notice of the ARP extended

election period for COBRA continuation coverage.

The individual may elect COBRA continuation

coverage under the original COBRA election period (as extended by the Emergency Relief Notices)

but will be eligible for COBRA premium assistance

only for periods of coverage beginning on or after

April 1, 2021. Alternatively, the individual may decline to elect COBRA continuation coverage under

the original COBRA election period (as extended by

the Emergency Relief Notices) and instead elect COBRA continuation coverage under the ARP extended

election period only for periods of coverage beginning on or after April 1, 2021.

Q-54. How does an election of COBRA

continuation coverage under the ARP extended election period apply in the case of

an HRA if the Assistance Eligible Individual elects COBRA continuation coverage

solely under the ARP extended election

period, and declines to elect coverage that

is retroactive to the qualifying event?

A-54. With respect to an election of

COBRA continuation coverage for an

HRA solely under the ARP extended election period, the HRA may no longer reimburse expenses incurred after the qualifying event that led to the loss of coverage

and before the first day of the first period

of coverage beginning on or after April

1,2021. Generally, qualified beneficiaries

electing COBRA continuation coverage

with respect to HRA coverage have access to the same level of reimbursements

during COBRA continuation coverage

as was available immediately before the

qualifying event. Thus, a qualified beneficiary electing COBRA continuation coverage with respect to an HRA under the ARP

extended election period will have access

to the same level of reimbursements as

the qualified beneficiary had immediately

before the qualifying event based on the

amount originally available for the HRA

plan year and reimbursements for expenses incurred before the qualifying event,

reduced by the amount of any reimbursements made after the qualifying event; for

example, reimbursements for expenses

incurred before the qualifying event that

were submitted and reimbursed after the

qualifying event.

1183

Q-55. If a qualified beneficiary due to

a reduction of hours or an involuntary termination of employment was previously

offered COBRA continuation coverage

with respect to both comprehensive health

coverage and dental-only or vision-only coverage and the qualified beneficiary

elected COBRA continuation coverage

only with respect to the dental-only or vision-only coverage, is the qualified beneficiary still a potential Assistance Eligible

Individual who must be offered the ARP

extended election with respect to the comprehensive health coverage?

A-55. Yes. A qualified beneficiary

whose qualifying event was a reduction

in hours or an involuntary termination of

employment is a potential Assistance Eligible Individual and must be offered the

ARP extended election period with respect to any health coverage the qualified

beneficiary was enrolled in prior to the

qualifying event and for which the individual does not have a COBRA election in

effect on April 1, 2021, even if the qualified beneficiary previously elected COBRA continuation coverage with respect

to other coverage in which the qualified

beneficiary was previously enrolled. If

the qualified beneficiary elects additional

COBRA continuation coverage pursuant

to the ARP extended election period, the

qualified beneficiary is an Assistance Eligible Individual with respect to all elected

COBRA continuation coverage.

EXTENSIONS UNDER THE

EMERGENCY RELIEF NOTICES

Q-56. What is the election period for

a potential Assistance Eligible Individual

to make the election for COBRA premium

assistance if the individual is also eligible

to elect COBRA continuation coverage

under the Emergency Relief Notices?

A-56. If a qualified beneficiary received a COBRA notice under § 4980B

before April 1, 2021, and also receives

the notice of the ARP extended election

period, then, within 60 days of receiving

the notice of the ARP extended election

period, the qualified beneficiary may

elect COBRA continuation coverage with

COBRA premium assistance for periods

of coverage beginning on or after April

1, 2021. If a qualified beneficiary elects

COBRA continuation coverage with CO-

June 7, 2021

BRA premium assistance, the individual

must also elect or decline COBRA continuation coverage retroactive to the loss

of coverage, if eligible, within 60 days of

receiving the notice of the ARP extended

election period. If the qualified beneficiary elects retroactive COBRA continuation coverage, the qualified beneficiary

may be required to pay COBRA premiums for periods of coverage beginning

before April 1, 2021.

Q-57. Do the extensions of timeframes

available under the Emergency Relief Notices apply to the required furnishing of

the notice of an ARP extended election period under § 9501(a)(5)(C), or to the ARP

extended election period to elect COBRA

continuation coverage with COBRA premium assistance beginning on or after

April 1, 2021, under § 9501(a)(4)?

A-57. No. The extensions of timeframes available under the Emergency

Relief Notices do not apply to either the

required furnishing of a notice of an ARP

extended election period under § 9501(a)

(5)(C) or to the ARP extended election period. The notice of the ARP extended election period under § 9501(a)(5)(C) must be

furnished by May 31, 2021 (60 days after

April 1, 2021). An individual receiving

the notice must elect COBRA continuation coverage no later than 60 days after

the notice is provided in order to receive

COBRA premium assistance.

Q-58. If a potential Assistance Eligible Individual elects retroactive COBRA

continuation coverage, how do the Emergency Relief Notices apply to payment of

the premiums for the retroactive coverage

and what are the consequences if the premiums are not timely paid?

A-58. The extensions of timeframes

under the Emergency Relief Notices remain available for premium payments for

the retroactive periods of coverage for potential Assistance Eligible Individuals and

those who have enrolled in COBRA continuation coverage with COBRA premium

assistance. If an Assistance Eligible Individual also elects retroactive coverage for

a period beginning before April 1, 2021,

the employer may require the individual

to pay the premiums for that period of

COBRA continuation coverage consistent

with the timeframes as extended under the

Emergency Relief Notices. If, by an applicable deadline, the individual fails to pay

June 7, 2021

any amount towards the total premiums

due for periods of retroactive COBRA

continuation coverage, the employer may

treat the individual as having not elected

COBRA coverage until the first period of

coverage beginning on or after April 1,

2021. If, by the applicable deadline, the

individual pays only a portion of the total

premiums due for retroactive coverage,

the plan may credit those premiums to the

earliest months of the retroactive COBRA

continuation coverage and resume providing COBRA continuation coverage as of

the first period of coverage beginning on

or after April 1, 2021.

Example: On November 1, 2020, an individual

becomes a qualified beneficiary as the result of an

involuntary termination of employment and receives

the COBRA election notice under § 4980B(f)(6)(D).

On April 30, 2021, the individual receives the notice of the ARP extended election period. On May

31, 2021, the individual elects both retroactive COBRA continuation coverage beginning on November

1, 2020, and COBRA continuation coverage with

premium assistance for the first period of coverage

beginning on or after April 1, 2021. The individual

pays premiums for only three months of retroactive

COBRA within the applicable payment deadlines.

The individual makes no other premium payments

before the applicable deadlines. The plan may treat

the individual as having retroactive COBRA continuation coverage only for November 2020, December

2020, and January 2021, and as having no retroactive COBRA coverage for February 2021 and March

2021 (because only three months of premiums were

paid). Because the individual also elected COBRA

continuation coverage with premium assistance for

the first period of coverage beginning on or after

April 1, 2021, the individual has COBRA continuation coverage with premium assistance for the first

period of coverage beginning on or after April 1,

2021 through the end of the period of coverage that

includes September 30, 2021, assuming the individual remains eligible for premium assistance throughout that period.

Q-59. May a potential Assistance Eligible Individual who elects COBRA continuation coverage with COBRA premium

assistance and who declines to elect retroactive COBRA continuation coverage

at that time later elect retroactive COBRA

continuation coverage?

A-59. No. If a potential Assistance Eligible Individual elects COBRA continuation coverage with COBRA premium

assistance but declines to elect COBRA

continuation coverage that would begin at

the time of a qualifying event that occurred

before April 1, 2021, that individual may

not, after the 60-day extended election

period for electing COBRA continuation

coverage under the ARP has ended, later

1184

elect COBRA continuation coverage that

begins at the time of the qualifying event.

Example: An individual has a qualifying event

that is an involuntary termination of employment on

March 1, 2021, and receives the COBRA election

notice the same day. The individual receives the notice of the ARP extended election period on May 31,

2021, and elects COBRA continuation coverage with

COBRA premium assistance starting April 1, 2021.

Assuming the Outbreak Period has not ended, the individual does not remain eligible after July 30, 2021

(60 days from the receipt of the individual’s notice of

the ARP extended election period), to elect COBRA

continuation coverage starting March 1, 2021, despite the extensions available under the Emergency

Relief Notices.

PAYMENTS TO INSURERS UNDER

FEDERAL COBRA

Q-60. In the case of an insured plan

subject to Federal COBRA that is not a

multiemployer plan, if the insurer and

the employer have agreed that the insurer will collect the COBRA premiums directly from the qualified beneficiaries, is

the insurer required to treat an Assistance

Eligible Individual as having paid the full

premium?

A-60. Yes. If the insurer fails to treat

the Assistance Eligible Individual as having made a payment of the full premium,

the insurer may be liable for the excise tax

under § 4980B(e)(1)(B), which applies to

each person responsible (other than in a

capacity as an employee) for administering or providing benefits under the plan

and whose act or failure to act caused (in

whole or in part) the failure, if the person assumed responsibility for the performance of the act to which the failure

relates. Notwithstanding the agreement

between the employer and the insurer, the

employer is required to pay the premium

to the insurer for the months of COBRA

premium assistance with respect to the individual.

COMPARABLE STATE

CONTINUATION COVERAGE

Q-61. Does a State continuation coverage program fail to provide comparable

coverage qualifying for COBRA premium

assistance under the ARP solely because

the maximum period of continuation coverage under the program differs from the

maximum period available under Federal

COBRA?

Bulletin No. 2021–23

A-61. No. A different period of continuation coverage under a State continuation coverage program does not by itself

mean a State program fails to provide

comparable coverage to Federal COBRA

continuation coverage under the ARP. For

example, the fact that a State continuation coverage program provides only six

months of continuation coverage (instead

of 18 months) would not by itself result in

the State program failing to provide comparable coverage. Similarly, State programs providing for different qualifying

events, different qualified beneficiaries, or

different maximum premiums generally

do not fail to provide comparable coverage solely for those reasons.

Q-62. In the case of an insured plan

subject solely to State law requiring the insurer to provide continuation coverage, is

the employer eligible to take the premium

assistance credit directly if the employer

pays the full premium to the insurer?

A-62. No. Under § 6432(b)(3), in the

case of an insured plan subject solely to

State law with respect to the requirement

to provide continuation coverage, the premium payee is the insurer providing the

coverage under the group health plan.

The Treasury Department and the IRS are

aware that this requirement may create administrative issues for certain Small Business Health Options Program (SHOP)

exchanges that aggregate premiums paid

by participating employers or where State

rules require full payment of premiums by

the employer; the Treasury Department

and the IRS are continuing to consider

this issue.

CALCULATION OF COBRA

PREMIUM ASSISTANCE CREDIT

Q-63. As a general rule, what is the

amount of the premium assistance credit

for a quarter?

A-63. If the employer does not subsidize COBRA premium costs for similarly

situated qualified beneficiaries who are not

Assistance Eligible Individuals, the credit

for a quarter is the amount equal to the

premiums not paid by Assistance Eligible

Individuals for COBRA continuation coverage due to the application of § 9501(a)

(1) of the ARP for the quarter. In this case,

the amount of the premiums not paid by

the Assistance Eligible Individuals is the

Bulletin No. 2021–23

premium amount charged for COBRA

continuation coverage to other similarly

situated covered employees and qualified

beneficiaries (for example, coverage for a

single individual, individual plus one, or

family who are not Assistance Eligible Individuals). The premium amount also includes any administrative costs otherwise

allowed (that is, generally 102 percent of

the applicable premium under § 4980B(f)

(4)) (see Q&A-64).

Q-64. What is the amount of the premium assistance credit if the employer

subsidizes the COBRA premium costs for

similarly situated covered employees and

qualified beneficiaries who are not Assistance Eligible Individuals?

A-64. The amount of the credit is the

premium that would have been charged

to an Assistance Eligible Individual in the

absence of the premium assistance, and

does not include any amount of subsidy

that the employer would have otherwise

provided. Thus, absent the premium assistance, if the premium that the employer

would have charged to an Assistance Eligible Individual is less than the maximum

COBRA premium—for example, if the

employer would have subsidized the coverage by paying all or part of the premium—the credit is equal to the amount that

the employer actually would have charged

to the Assistance Eligible Individual.

For the following examples, assume

102 percent of the applicable premium for

COBRA continuation coverage is $1,000

per month, and the premium payee is the

common law employer maintaining the

plan.

Example 1: Absent the COBRA premium assistance, the common law employer requires individuals electing COBRA continuation coverage to pay

$500 per month. The credit is $500 per month.

Example 2: The common law employer requires

active employees to pay $200 per month for health

coverage. Absent the COBRA premium assistance,

for involuntarily terminated employees, severance

benefits include continued health coverage at the

cost of $200 per month for three months after termination. After the three-month severance period,

the terminated employee must pay $1,000 per month

for the remainder of COBRA continuation coverage. The common law employer considers the loss

of coverage to occur on the last day coverage is in

effect before the severance benefits begin; that is, the

common law employer considers the three-month

severance period (during which the employer pays

$800 toward the cost of the terminated employee’s

COBRA continuation coverage) to be part of the terminated employee’s COBRA continuation period of

coverage.

1185

A potential Assistance Eligible Individual has an involuntary termination of employment as of April 1, 2021, and makes

the COBRA continuation election effective as of that date. For April, May, and

June 2021, the credit is $200 per month.

For July, August, and September 2021, the

credit is $1,000 per month.

Example 3: Same facts as Example 2, except

that the common law employer considers the loss of

health coverage and the beginning of the terminated

employee’s COBRA continuation period of coverage

to occur at the end of the three-month severance period. For the first three months after termination of

employment, the terminated employee is not eligible

for COBRA continuation coverage and is not an Assistance Eligible Individual. Instead, the employee

pays $200 for coverage that is not a premium for COBRA continuation coverage. The employee receives

severance benefits for health coverage beginning on

April 1, 2021, and then elects COBRA continuation

coverage beginning on July 1, 2021 (after the end of

the three-month severance period) and becomes an

Assistance Eligible Individual. The credit is $0 per

month for April, May, and June 2021, and $1,000 per

month for July, August, and September 2021.

Example 4: Same facts as Example 2, except that

for involuntarily terminated employees, the severance benefits include continued health coverage at

no cost for the three months after termination of employment.

Because the monthly premium (absent

the COBRA premium assistance) during

April, May, and June 2021 is zero, COBRA premium assistance is not available

and there is no credit for those months.

After the severance period, the terminated

employee is entitled to COBRA continuation coverage with COBRA premium assistance for July, August, and September

2021. The credit is $1,000 per month for

July, August, and September 2021.

Q-65. If a plan that previously charged

less than the maximum premium allowed

under the COBRA continuation provisions increases the premium for similarly

situated covered employees and qualified

beneficiaries pursuant to § 54.4980B-8,

Q&A-2(b)(1) (or similar authority under

comparable State law or other Federal

law), does the COBRA premium assistance apply to the increased premium

amount?

A-65. Yes.

Example: Under the plan, 102 percent of the applicable premium for COBRA continuation coverage

is $1,000 per month. For periods of coverage before

April 1, 2021, the plan charged $500 per month

for COBRA continuation coverage. Pursuant to

§ 54.4980B-8, Q&A-2(b)(1) and the applicable notice requirements, beginning April 1, 2021, the plan

charges $1,000 per month for COBRA continuation

June 7, 2021

coverage for all covered employees and qualified

beneficiaries. The COBRA premium assistance and

the premium assistance credit are $1,000 per Assistance Eligible Individual per month for the coverage

beginning April 1, 2021.

Q-66. If a plan that previously charged

less than the maximum premium allowed

under the COBRA continuation provisions increases the premium pursuant

to § 54.4980B-8, Q&A-2(b)(1), and the

employer provides a separate taxable payment to the Assistance Eligible Individual,

does the premium assistance credit apply

to the increased premium amount?

A-66. Yes.

Example: Under a group health plan, 102 percent

of the applicable premium for COBRA continuation

coverage is $1,000 per month. Before April 1, 2021,

the plan charged $400 per month for COBRA continuation coverage. Pursuant to § 54.4980B-8, Q&A2(b)(1), and the applicable notice requirements, the

plan charges all covered employees and qualified

beneficiaries $1,000 per month for COBRA continuation coverage for periods of coverage beginning

April 1, 2021. In addition, beginning April 1, 2021,

the employer provides a taxable severance benefit of

$600 per month to employees who are Assistance Eligible Individuals. An Assistance Eligible Individual

is entitled to COBRA continuation coverage without

payment of any premium. The credit is $1,000.

Q-67. If COBRA continuation coverage is provided under a State program that

provides comparable continuation coverage, does the premium assistance credit

apply to portions of the premium attributable to COBRA continuation coverage for

those individuals who would not be qualified beneficiaries under Federal COBRA?

A-67. No. While § 9501(a)(9)(B) of

the ARP defines the COBRA continuation coverage eligible for COBRA premium assistance to include comparable

State continuation coverage, a qualified

beneficiary is defined under § 9501(a)(9)

(E) by cross-reference to § 607(3) of ERISA. Thus, COBRA premium assistance is

limited to the premium attributable to the

coverage of the employee who was involuntarily terminated (other than by reason

of such employee’s gross misconduct) or

had a reduction in hours as a qualifying

event and that employee’s spouse or dependent children who are qualified beneficiaries under Federal COBRA, even if the

State law requires a group health plan to

provide continuation coverage to a broader group of individuals (for example, another member of the individual’s household who is not the spouse or a dependent

child).

June 7, 2021

Q-68. If COBRA continuation coverage of one or more Assistance Eligible

Individuals also covers one or more individuals who are not Assistance Eligible

Individuals, how is the premium for the

COBRA continuation coverage allocated

among the Assistance Eligible Individuals

and the other individuals in determining

the premium assistance credit?

A-68. The premium amounts for COBRA continuation coverage for one or

more individuals who are Assistance Eligible Individuals and one or more individuals who are not Assistance Eligible Individuals are allocated first to the premiums

for the Assistance Eligible Individuals,

based on the cost of COBRA continuation coverage (without COBRA premium

assistance) for only Assistance Eligible

Individuals, and then to the premiums for

the individuals who are not Assistance Eligible Individuals. Thus, if the total cost

of the coverage for all covered individuals does not exceed the premium costs for

the Assistance Eligible Individuals alone,

then the premium for the individual who

is not an Assistance Eligible Individual is

zero, and the COBRA premium assistance

is the full applicable premium amount of

the COBRA continuation coverage. If the

coverage of an individual who is not an

Assistance Eligible Individual increases

the total COBRA premium for all individuals, that incremental additional cost is

not COBRA premium assistance for purposes of the credit.

Example 1: An employee and the employee’s

two dependent children are Assistance Eligible Individuals and have COBRA continuation coverage.

COBRA continuation coverage also covers an individual who lives in the same household who is not an

Assistance Eligible Individual. The amount the plan

requires to be paid for COBRA continuation coverage for self-plus-two-or-more-dependents (which

includes the individual who is not an Assistance Eligible Individual) is $1,000 per month.

The amount the employee would pay

(absent the COBRA premium assistance)

for coverage for the employee and the two

children (the Assistance Eligible Individuals) for COBRA continuation coverage is

$1,000 per month. The additional premium amount for coverage of the individual

who is not an Assistance Eligible Individual is $0 per month. The employee is entitled to apply the COBRA premium assistance for the full $1,000 premium amount

per month. The credit is $1,000 per month.

1186

Example 2: Same facts as Example 1, except the

employee has only one dependent child, and the plan

charges $800 per month for self-plus-one-dependent

COBRA continuation coverage. The portion of the

premium attributable to coverage for the individual

and the individual’s dependent child (both Assistance Eligible Individuals) is $800 per month.

The employee is entitled to apply the

COBRA premium assistance to the $800

per month attributable to the Assistance

Eligible Individuals. The incremental

amount the employee pays for COBRA

continuation coverage for the individual

who is not an Assistance Eligible Individual is $200 per month, so the employee’s

total premium payment is $200 per month.

The credit is $800 per month.

Example 3: An employee is an Assistance Eligible Individual who has self-only coverage that would

cost $450 per month (absent the COBRA premium

assistance). During the ARP extended election period, the plan has an open enrollment period during

which it allows active employees and qualified beneficiaries to add spouses and dependents to their

health coverage. The employee adds the employee’s

spouse and dependent child, who were not covered

before the employee’s qualifying event, to the employee’s COBRA continuation coverage. Without

regard to the COBRA premium assistance, COBRA

continuation coverage for self-plus-two-or-more-dependents is $1,000 per month.

The spouse and the dependent child

are not Assistance Eligible Individuals because they were not covered by the plan

on the day before the employee’s qualifying event. The amount the employee pays

for the spouse and the dependent child is

$550 per month ($1,000 less $450). The

employee is entitled to COBRA premium

assistance with respect to $450 per month.

The credit is $450 per month.

Q-69. Does the premium assistance apply to the increased premium if the plan,

in compliance with § 54.4980B-8, Q&A2(c), allows the Assistance Eligible Individual to change coverage from the benefit package that covered the individual

before a reduction in hours or involuntary

termination of employment to a different

benefit package with a higher applicable

premium that allows for an increase in the

premium amount charged to the Assistance Eligible Individual?

A-69. Yes. (But see Q&A-42 regarding

the ability of an Assistance Eligible Individual to enroll in coverage under a plan

that is different than the coverage in which

the individual was enrolled at the time of

the qualifying event pursuant to § 9501(a)

(1)(B) of the ARP.)

Bulletin No. 2021–23

Q-70. How is the premium assistance

credit calculated for an individual coverage health HRA?

A-70. The credit for an individual coverage HRA is limited to 102 percent of the

amount actually reimbursed with respect

to an Assistance Eligible Individual.

Example: An individual coverage HRA provides

a monthly benefit of the lesser of the premium for

the individual health insurance coverage purchased

by the employee or $1,000 and charges the maximum allowable administrative fee for COBRA continuation coverage, for a total maximum COBRA

premium of $1,020. Individual A and Individual B

are Assistance Eligible Individuals and are enrolled

in COBRA continuation coverage. For April 2021,

Individual A is reimbursed for a premium payment

for individual health insurance coverage of $900;

Individual B is reimbursed for $1,000 of a $2,000

premium payment for individual health insurance

coverage. The credit for April is $918 with respect to

Individual A and $1,020 with respect to Individual B.

CLAIMING THE COBRA PREMIUM

ASSISTANCE CREDIT

Q-71. Who is eligible for the premium

assistance credit under § 6432(a) of the

Code?

A-71. Under § 6432(a) of the Code, the

premium payee for continuation coverage

under § 9501(a)(1) of the ARP is eligible

for the credit.

Q-72. Who is the premium payee under

§ 9501(a)(1) of the ARP?

A-72. The premium payee is:

(1) The multiemployer plan, in the case

of a group health plan that is a multiemployer plan (as defined in § 3(37)

of ERISA);

(2) The common law employer maintaining the plan, in the case of a

group health plan, other than a multiemployer plan, that is (a) subject to

Federal COBRA, or (b) under which

some or all of the coverage is not provided by insurance (that is, a plan that

is self-funded, in whole or in part);

(3) The insurer providing the coverage,

in the case of any other group health

plan not described in (1) or (2) (generally, fully insured coverage subject

to State continuation coverage requirements).

Q-73. May a governmental entity be a

premium payee, and therefore eligible for

the premium assistance credit?

8

A-73. Yes. A premium payee may include the government of any State or political subdivision thereof, any Indian tribal government (as defined in § 139E(c)

(1)), any agency or instrumentality of any

of the foregoing, and any agency or instrumentality of the Government of the United States that is described in § 501(c)(1)

and exempt from taxation under § 501(a).

Q-74. When does the premium payee

become entitled to the premium assistance

credit?

A-74. As of the date on which the premium payee receives the potential Assistance Eligible Individual’s election of COBRA continuation coverage, the premium

payee is entitled to the credit for premiums not paid by an Assistance Eligible

Individual by reason of § 9501(a)(1) for

any periods of coverage that began before

that date.8 The premium payee is entitled

to the credit for the premiums not paid by

an Assistance Eligible Individual for each

subsequent period of coverage as of the

beginning of each period of coverage that

the individual does not pay the premiums

by reason of § 9501(a)(1) in accordance

with the individual’s election, without regard to when the premium payee could

have required the payment of any premium. (See Q&A-86 for information regarding entitlement to the credit if an Assistance Eligible Individual erroneously pays

the premium.)

Example: A premium payee’s COBRA period

of coverage is a calendar month with COBRA premium payments due on the tenth day of each calendar month. The premium payee pays its employees

semi-monthly, with payroll periods ending on the

fifteenth of the month and the last day of the month.

On June 17, 2021, the premium payee receives a COBRA election from a potential Assistance Eligible

Individual who elects COBRA continuation coverage as of April 1, 2021. The premium payee is entitled to a credit as of June 17, 2021, for the premiums

not paid by the Assistance Eligible Individual for the

periods of coverage April 1, 2021, through April 30,

2021, May 1, 2021, through May 31, 2021, and June

1, 2021, through June 30, 2021. Assuming the Assistance Eligible Individual does not notify the premium payee that the Assistance Eligible Individual is

no longer eligible for COBRA premium assistance

(and the premium payee does not otherwise become

aware that the Assistance Eligible Individual is ineligible), the premium payee becomes entitled to the

credit as of July 1, 2021, for the premiums not paid

by the Assistance Eligible Individual for the period

of coverage of July 1, 2021, through July 31, 2021.

(Assuming the facts remain as stated, the premium

payee would be entitled to the credit on (i) August 1,

2021, for the period of coverage of August 1, 2021,

through August 31, 2021, and (ii) September 1, 2021,

for the period of coverage of September 1, 2021,

through September 30, 2021.)

Q-75. How does a premium payee

claim the premium assistance credit?

A-75. A premium payee claims the

credit by reporting the credit (both the

nonrefundable and refundable portions of

the credit, as applicable) and the number

of individuals receiving COBRA premium

assistance on the designated lines of its

federal employment tax return(s), usually

Form 941, Employer’s Quarterly Federal

Tax Return.

In anticipation of receiving the credit

to which it is entitled, the premium payee may (1) reduce the deposits of federal employment taxes, including withheld taxes, that it would otherwise be

required to deposit, up to the amount of

the anticipated credit, and (2) request an

advance of the amount of the anticipated

credit that exceeds the federal employment tax deposits available for reduction

by filing Form 7200, Advance Payment

of Employer Credits Due to COVID-19.

See Notice 2021-24 for more information regarding the reduction in deposits

for the credit and other employment tax

credits.

Example 1: Under the facts in the Example in

Q&A-74, the premium payee should report the credit

for April through June 2021 on the Form 941 for the

second quarter of 2021.

Example 2: Same facts as in the Example in

Q&A-74, except that the premium payee receives

a COBRA election from an Assistance Eligible Individual on July 17, 2021, and the individual elects

COBRA continuation coverage as of June 1, 2021.

The premium payee becomes entitled to a corresponding credit as of July 17, 2021, for the premiums

not paid by the Assistance Eligible Individual for

the periods of coverage of (1) June 1 through June

30, 2021, and (2) July 1 through July 31, 2021. The

premium payee should report the total credit on the

Form 941 for the third quarter of 2021, including the

credit for the periods of coverage from June 1, 2021

through June 30, 2021.

Q-76. When may a premium payee reduce its deposits of federal employment

taxes and, if applicable, file Form 7200 to

request an advance of the anticipated premium assistance credit that exceeds the

federal employment tax deposits available

for reduction for a quarter?

A period of coverage is defined under § 9501(a)(9)(H) as a monthly or a shorter period with respect to which premiums are charged by the plan or issuer.

Bulletin No. 2021–23

1187

June 7, 2021

A-76. A premium payee may reduce its

deposits of federal employment taxes in

anticipation of the credit to which the premium payee has become entitled with regard to a period of coverage as of the date

the premium payee is entitled to the credit

as described in Q&A-74. If the anticipated credit exceeds the federal employment

tax deposits available for reduction, the

premium payee may file Form 7200 to

request an advance payment of the credit.

The Form 7200 may be filed after the end

of the payroll period in which the premium payee became entitled to the credit.

Deposits may not be reduced, and advances may not be requested, for a credit

for a period of coverage that has not begun. Form 7200 must be filed before the

earlier of (1) the day the employment tax

return for the quarter in which the premium payee is entitled to the credit is filed,

or (2) the last day of the month following

that quarter. The premium payee entitled

to the credit should also report any advance payments received in anticipation

of the credit for the quarter on the employment tax return.

Example: Same facts as in the Example in Q&A74. The premium payee may reduce its federal employment tax deposits as of June 17, 2021, the date

the Assistance Eligible Individual elected COBRA

continuation coverage, in anticipation of the credit to

which the premium payee has become entitled. However, if the credit exceeds the available reduction in

deposits, the premium payee may file Form 7200 to

request an advance for the remaining credit after the

end of the semi-monthly payroll period in which the

premium payee became entitled to the credit. Thus,

because the Assistance Eligible Individual elected

COBRA continuation coverage on June 17, 2021,

the premium payee may seek an advance beginning

on July 1, 2021, the day after the end of the payroll

period of June 16 through June 30, 2021.

Assuming the Assistance Eligible Individual did not notify the premium payee

that the Assistance Eligible Individual is

no longer eligible for COBRA continuation coverage (and the premium payee did

not otherwise become aware of the Assistance Eligible Individual’s ineligibility),

the premium payee becomes entitled to

an additional credit as of July 1, 2021, for

the premiums not paid by the Assistance

Eligible Individual for the period of coverage of July 1 through July 30, 2021. The

premium payee may reduce its federal

employment deposits as of July 1, 2021,

in anticipation of the credit to which the

premium payee has become entitled. If

the anticipated credit exceeds the feder-

June 7, 2021

al employment tax deposits available for

reduction, the premium payee may file

Form 7200 to request an advance for the

remaining credit. However, because the

semi-monthly payroll period in which the

premium payee becomes entitled to the

credit does not end until July 15, the premium payee may not seek an advance for

the credit until July 16, 2021, even though

it may reduce deposits on July 1, 2021, the

day the premium payee is entitled to the

credit.

Q-77. How is the premium assistance

credit claimed if the premium payee does

not have any employment tax liability, for

example, in the case of a multiemployer

plan with no employees?

A-77. If the premium payee entitled

to claim the credit does not have any employment tax liability, the premium payee should claim the credit on the Form

941 for the quarter in which the premium payee becomes entitled to the credit.

The premium payee entitled to the credit

should also report any advance payments

received in anticipation of the credit on

the same Form 941. The premium payee

should enter zero on all remaining non-applicable lines so that the overpayment

amount on the Form 941 is the amount of

the credit reduced by any advance payment received.

Q-78. If an Assistance Eligible Individual receiving COBRA premium assistance

fails to provide notice of the individual’s

eligibility for coverage under any other

disqualifying group health plan or Medicare and continues receiving COBRA

premium assistance, is the premium payee required to refund to the IRS the premium assistance credit arising from the

period after the individual’s eligibility for

COBRA premium assistance ended due to

eligibility for the other coverage?

A-78. No. If an Assistance Eligible

Individual fails to provide notice that the

individual is no longer eligible for the

COBRA premium assistance due to eligibility for other disqualifying group health

plan coverage or Medicare, the premium

payee is still entitled to the credit received

for that period of ineligibility, unless the

premium payee knew of the individual’s

eligibility for the other coverage. If the

premium payee learns that the individual

is eligible for other coverage (and thus of

the individual’s ineligibility for COBRA

1188

premium assistance), the premium payee

is not entitled to the credit from that point

forward.

Q-79. Is the premium assistance credit

included in gross income?

A-79. Yes. Under § 6432(e), the gross

income of any premium payee allowed a

credit is increased by the amount of the

credit for the taxable year which includes

the last day of any quarter with respect to

which the credit is allowed.

Q-80. May a premium payee claim the

premium assistance credit with respect

to amounts that are taken into account

as qualified wages under § 2301 of the

CARES Act or § 3134 of the Code, or

as qualified health plan expenses under

§§ 7001(d) or 7003(d) of the FFCRA or

§§ 3131 or 3132 of the Code?

A-80. No. Under § 6432(e), a premium

payee may not claim a double benefit with

respect to these amounts.

Q-81. May a premium payee that uses

a third-party payer to report and pay employment taxes to the IRS receive the premium assistance credit?

A-81. Yes. The premium payee is entitled to the credit, regardless of whether

it uses a third-party payer (such as a reporting agent, payroll service provider, professional employer organization

(PEO), certified professional employer

organization (CPEO), or § 3504 agent)

to report and pay its federal employment

taxes. Thus, unless the third-party payer is

treated as the premium payee for purposes of the credit in accordance with Q&A82, the third-party payer is not entitled to

the credit, regardless of whether the third

party is considered an “employer” for

other purposes of the Code. However, the

third-party payer may report the credit on

behalf of a client that is the premium payee with respect to any federal employment

taxes it reports and pays on the premium

payee’s behalf. Different rules apply depending on the type of third-party payer

the premium payee uses, as follows.

If a premium payee uses a reporting

agent to file its federal employment tax returns, the reporting agent will need to reflect the credit on the federal employment

tax returns it files on behalf of the premium

payee. If a premium payee uses a CPEO or

a § 3504 agent that received its designation as an agent by submitting Form 2678,

Employer/Payer Appointment of Agent, to

Bulletin No. 2021–23

report its federal employment taxes on an

aggregate Form 941, the CPEO or § 3504

agent will report the credit on its aggregate Form 941 and Schedule R, Allocation

Schedule for Aggregate Form 941 Filers.

If a premium payee uses a non-certified

PEO or other third-party payer (other than

a CPEO or § 3504 agent that submitted

Form 2678) that reports and pays the premium payee’s federal employment taxes

under the third-party payer’s Employer

Identification Number (EIN), the PEO or

other third-party payer will need to report

the credit on an aggregate Form 941 and

separately report the credit allocable to the

premium payees for which it is filing the

aggregate Form 941 on an accompanying

Schedule R.

A premium payee that uses a third-party payer to report and pay employment

taxes to the IRS must nonetheless submit

its own Form 7200 to request any advance

payment of the credit. The premium payee

will need to provide a copy of the Form

7200 to the CPEO, § 3504 agent, or other third-party payer that reports and pays

the premium payee’s federal employment

taxes under the third-party payer’s EIN, so

the third-party payer can properly report

the credit on the employment tax return.

Q-82. May a third-party payer (such as

a PEO, CPEO, or § 3504 agent) be treated

as a premium payee for purposes of claiming the premium assistance credit?

A-82. Yes, but only under certain circumstances. A third-party payer is treated

as the premium payee for purposes of the

credit if the third-party payer: (i) maintains the group health plan, (ii) is considered the sponsor of the group health plan

and is subject to the applicable DOL COBRA guidance, including providing the

COBRA election notices to qualified beneficiaries, and (iii) would have received

the COBRA premium payments directly

from the Assistance Eligible Individuals

were it not for the COBRA premium assistance (the TPP Plan Administrator). In this

case, the third-party payer’s client is not

treated as a premium payee and is, therefore, not eligible for the credit. However,

in circumstances in which a third-party

payer files an aggregate employment tax

return to report and pay employment taxes

for individuals who are common law employees of the third-party payer’s clients,

and the conditions set forth in (i) through

Bulletin No. 2021–23

(iii) above are not satisfied, the third-party

payer is not treated as the premium payee

and may claim the credit only on behalf of

its clients (See Q&A-81).

As the premium payee, the TPP Plan

Administrator claims the credit on the

applicable lines on Form 941 and, if the

TPP Plan Administrator otherwise has to

complete Schedule R, the TPP Plan Administrator would report the credit that

it is claiming in that capacity on line 8

of the Schedule R, rather than separately with respect to each client for which

it was acting as TPP Plan Administrator.

(If the third-party payer was not a TPP

Plan Administrator for all of its clients,

the third-party payer may also claim the

credit on behalf of its clients that are premium payees, but would be required to

separately report the credit with respect

to each of those premium payee clients on

Schedule R.)

TPP Plan Administrators may reduce

the deposits of federal employment taxes

relating to their own employees (that is,

those employees for whom they are filing as the common law employer rather

than as a third-party payer) in anticipation of the credit in accordance with the

procedures described in Q&A-76. If the

anticipated credit exceeds the available

reduction of these deposits, the TPP Plan

Administrator may file Form 7200 to request an advance payment of the credit in

accordance with the procedures described

in Q&A-76.

The TPP Plan Administrator is subject

to § 6432(e) and must, correspondingly,

increase its gross income for the taxable

year that includes the last day of any calendar quarter with respect to which the

credit is allowed to the TPP plan administrator. The TPP Plan Administrator is

not allowed a credit with respect to any

amount that is taken into account (by any

person, including a client for whom it files

returns as a third-party payer) as qualified wages under § 2301 of the CARES

Act or § 3134 of the Code, or as qualified

health plan expenses under §§ 7001(d)

or 7003(d) of the FFCRA, or §§ 3131 or

3132 of the Code.

Example: A third-party payer maintains and is

the sponsor of a group health plan on behalf of all

of its clients. Due to the nature of the arrangement

with each client, the third-party payer is responsible

for providing its clients’ covered employees with the

COBRA election notices, and the third-party payer

1189

requires individuals enrolled in COBRA continuation coverage to pay the COBRA premiums directly

to the third-party payer. Consequently, this third-party payer is treated as a TPP Plan Administrator and

is the premium payee that is entitled to any credit.

The plan’s COBRA period of coverage

is a calendar month with COBRA premium

payments due on the first day of each calendar month. The TPP Plan Administrator

pays its own employees that perform services for the TPP Plan Administrator on a

semi-monthly basis, with payroll periods

ending on the fifteenth of the month and

the last day of the month, respectively. On

June 17, 2021, the TPP Plan Administrator

receives a COBRA election from a client’s

potential Assistance Eligible Individual

who elects COBRA continuation coverage as of April 1, 2021. The TPP Plan

Administrator is entitled to a credit as of

June 17, 2021, for the premiums not paid

by the Assistance Eligible Individual for

the periods of coverage of April 1 through

April 30, 2021, May 1 through May 31,

2021, and June 1 through June 31, 2021.

Assuming the Assistance Eligible Individual does not notify the TPP Plan Administrator that the individual is no longer

eligible for COBRA premium assistance

(and the TPP Plan Administrator does not

otherwise become aware that the Assistance Eligible Individual is ineligible), the

TPP Plan Administrator becomes entitled

to the credit as of July 1, 2021, for the premiums not paid by the Assistance Eligible

Individual for the period of coverage of

July 1 through July 30, 2021. (Assuming

the facts continue as stated, the TPP Plan

Administrator would be entitled to the

credit on (i) August 1, 2021, for the period

of coverage of August 1 through August

31, 2021, and (ii) September 1, 2021, for

the period of coverage of September 1

through September 30, 2021.)

Q-83. What information must a

third-party payer obtain from its clients

that are premium payees to claim the premium assistance credit on their behalf?

A-83. If a third-party payer (such as

a CPEO, PEO, or other § 3504 agent) is

claiming the credit on behalf of a client

that is a premium payee, it must obtain

from the premium payee any information

that would have been necessary for the

premium payee to accurately claim the

credit on its own behalf.

Q-84. Must a premium payee or a

third-party payer claiming the premium

June 7, 2021

assistance credit on behalf of a premium

payee maintain records to substantiate eligibility for the credit?

A-84. Yes. Records substantiating

the premium payee’s eligibility for the

credit must be maintained, either by the

third-party payer or the premium payee.

A premium payee, or a third-party payer

that is claiming the credit on behalf of a

client that is a premium payee, must, at

the IRS’s request, provide to the IRS records that substantiate eligibility for the

credit, including documentation demonstrating that individuals were eligible for

the COBRA premium assistance. The

premium payee and the third-party payer will be liable for employment taxes

that are due as a result of any improper

claim of premium assistance credits in

accordance with their liability under the

Code and applicable regulations for the

employment taxes reported on the federal employment tax return filed by the

third-party payer on which the credits

were claimed.

Q-85. If an Assistance Eligible Individual pays premiums for which the individual should have received COBRA premium

assistance under § 9501(a)(1)(A), and the

premium payee reimburses the Assistance

Eligible Individual for that amount, when

is the premium payee entitled to the premium assistance credit with respect to the

reimbursement?

A-85. The premium payee is entitled to

the credit on the date the premium payee

reimburses the Assistance Eligible Individual for the premium amounts for which

the individual should have received COBRA premium assistance.

Q-86. If a third party (such as a charity) paid premium charges on behalf of an

Assistance Eligible Individual for which

the individual should have received COBRA premium assistance, should the premium payee reimburse the third party or

the Assistance Eligible Individual for the

premium amounts for which the individual should have received COBRA premium

assistance?

A-86. The premium payee is responsible for ensuring that reimbursements are

made and should reimburse the Assistance

Eligible Individual, unless the premium

payee is aware that the individual has assigned the right to the reimbursed premium payments to the third party.

ADDITIONAL ISSUES

The Treasury Department and the IRS

are aware of certain additional issues related to the COBRA premium assistance

provisions in the ARP that are not addressed in this notice, in particular as noted in Q&A-62. The Treasury Department

and the IRS are continuing to consider

these issues and the possibility of issuing

guidance with respect to them.

DRAFTING INFORMATION

The principal author of this notice is

Jason Sandoval of the Office of Associate Chief Counsel (Employee Benefits,

Exempt Organizations, and Employment

Taxes), and other Treasury Department

and IRS officials participated in its development. For further information on

the provisions of this notice, contact Jason Sandoval at (202) 317-5500 (not a

toll-free number). For further information

on topics addressed in the section of this

notice titled Claiming the COBRA Premium Assistance Credit, contact Mikhail

Zhidkov at (202) 317-4774 (not a toll-free

number).

Update for Weighted

Average Interest Rates,

Yield Curves, and Segment

Rates

Notice 2021-33

This notice provides guidance on the

corporate bond monthly yield curve, the

corresponding spot segment rates used

under § 417(e)(3), and the 24-month average segment rates under § 430(h)(2) of the

Internal Revenue Code. In addition, this

notice provides guidance as to the interest

rate on 30-year Treasury securities under

§ 417(e)(3)(A)(ii)(II) as in effect for plan

years beginning before 2008 and the 30year Treasury weighted average rate under

§ 431(c)(6)(E)(ii)(I).

In addition to providing these rates

for current periods, this notice provides

24-month average segment rates for earlier periods for plan years beginning in 2020

and 2021, determined under § 430(h)(2)

(C)(iv) of the Code reflecting the modifications made by § 9706(a) of the American Rescue Plan Act of 2021, Pub. L.

No. 117-2 (ARP), which was enacted on

March 11, 2021.

YIELD CURVE AND SEGMENT

RATES

Section 430 specifies the minimum

funding requirements that apply to single-employer plans (except for CSEC

plans under § 414(y)) pursuant to § 412.

Section 430(h)(2) specifies the interest rates that must be used to determine

a plan’s target normal cost and funding

target. Under this provision, present value is generally determined using three

24-month average interest rates (“segment rates”), each of which applies to

cash flows during specified periods. To

the extent provided under § 430(h)(2)

(C)(iv), these segment rates are adjusted

by the applicable percentage of the 25year average segment rates for the period

ending September 30 of the year preceding the calendar year in which the plan

year begins.1 However, an election may

be made under § 430(h)(2)(D)(ii) to use

the monthly yield curve in place of the

segment rates.

Notice 2007-81, 2007-44 I.R.B. 899,

provides guidelines for determining the

monthly corporate bond yield curve, and

the 24-month average corporate bond

segment rates used to compute the target normal cost and the funding target.

Consistent with the methodology specified in Notice 2007-81, the monthly

corporate bond yield curve derived from

April 2021 data is in Table 2021-4 at the

end of this notice. The spot first, second,

and third segment rates for the month of

April2021 are, respectively, 0.67, 2.84,

and 3.47.

Pursuant to § 433(h)(3)(A), the 3rd segment rate determined under § 430(h)(2)(C) is used to determine the current liability of a CSEC plan (which is used to calculate the minimum amount

of the full funding limitation under § 433(c)(7)(C)).

1

June 7, 2021

1190

Bulletin No. 2021–23

The 24-month average segment rates

determined

under

§ 430(h)(2)(C)(i)

through (iii) must be adjusted pursuant to

§ 430(h)(2)(C)(iv) to be within the applicable minimum and maximum percentages of the corresponding 25-year average

segment rates.

Applicable Month

May 2021

24-MONTH AVERAGE CORPORATE

BOND SEGMENT RATES

The three 24-month average corporate bond segment rates applicable for

May2021 without adjustment for the 25year average segment rate limits are as

follows:

24-Month Average Segment Rates Without 25-Year Average Adjustment

First Segment

Second Segment

1.36

2.80

25-YEAR AVERAGE SEGMENT

RATES

Section 9706(a) of ARP changes the

25-year average segment rates and the

applicable minimum and maximum percentages used under § 430(h)(3)(C)(iv) of

the Code to adjust the 24-month average

segment rates. Prior to this change, the applicable minimum and maximum percentages were 90% and 110% for a plan year

beginning in 2020, and 85% and 115% for

a plan year beginning in 2021, respectively. After this change, the applicable mini-

For Plan Years

Beginning In

The 25-year average segment rates for

plan years beginning in 2020 and 2021

were published Notice 2019-51, 2019-41

I.R.B. 866, and Notice 2020-72, 2020-40

I.R.B. 789, respectively.

mum and maximum percentages are 95%

and 105% for a plan year beginning in

2020 or 2021. In addition, pursuant to this

change, any 25-year average segment rate

that is less than 5% is deemed to be 5%.2

Pursuant to § 9706(c)(1) of ARP, these

changes apply with respect to plan years

beginning on or after January 1, 2020.

However, § 9706(c)(2) of ARP provides

that a plan sponsor may elect not to have

these changes apply to any plan year beginning before January 1, 2022.3

The adjusted 24-month average segment rates set forth in the chart below

Third Segment

3.49

reflect § 430(h)(2)(C)(iv) of the Code

as amended by § 9706(a) of ARP. These

adjusted 24-month average segment

rates apply only for plan years for which

an election under § 9706(c)(2) of ARP is

not in effect. For a plan year for which

such an election does not apply, the

24-month averages applicable for May

2021, adjusted to be within the applicable minimum and maximum percentages of the corresponding 25-year average segment rates in accordance with

§ 430(h)(2)(C)(iv) of the Code, are as

follows:

Adjusted 24-Month Average Segment Rates

Applicable

First

Second

Month

Segment

Segment

Third

Segment

2020

May 2021

4.75

5.50

6.27

2021

May 2021

4.75

5.36

6.11

The adjusted 24-month average segment rates set forth in the chart below do

not reflect the changes to § 430(h)(2)(C)

(iv) of the Code made by § 9706(a) of

ARP. These adjusted 24-month average

For Plan Years

Beginning In

segment rates apply only for plan years for

which an election under § 9706(c)(2) of

ARP is in effect. For a plan year for which

such an election applies, the 24-month averages applicable for May 2021, adjusted

to be within the applicable minimum and

maximum percentages of the corresponding 25-year average segment rates in accordance with § 430(h)(2)(C)(iv) of the

Code, are as follows:

Pre-ARP Adjusted 24-Month Average Segment Rates

Applicable

First

Second

Month

Segment

Segment

Third

Segment

2020

May 2021

3.64

5.21

5.94

2021

May 2021

3.32

4.79

5.47

Pursuant to this change, the 25-year averages of the first segment rate for 2020 and 2021 are increased to 5.00% because those 25-year averages as originally published are below 5.00%.

This election may be made either for all purposes for which the amendments under § 9706 of ARP apply or solely for purposes of determining the adjusted funding target attainment percentage under § 436 of the Code for the plan year.

2

3

Bulletin No. 2021–23

1191

June 7, 2021

30-YEAR TREASURY SECURITIES

INTEREST RATES

Section 431 specifies the minimum

funding requirements that apply to multiemployer plans pursuant to § 412. Section

431(c)(6)(B) specifies a minimum amount

for the full-funding limitation described in

§ 431(c)(6)(A), based on the plan’s current

liability. Section 431(c)(6)(E)(ii)(I) pro-

vides that the interest rate used to calculate

current liability for this purpose must be

no more than 5 percent above and no more

than 10 percent below the weighted average of the rates of interest on 30-year Treasury securities during the four-year period

ending on the last day before the beginning

of the plan year. Notice 88-73, 1988-2 C.B.

383, provides guidelines for determining

the weighted average interest rate. The rate

of interest on 30-year Treasury securities

for April2021 is 2.30 percent. The Service

determined this rate as the average of the

daily determinations of yield on the 30-year

Treasury bond maturing in February 2051.

For plan years beginning in May2021, the

weighted average of the rates of interest on

30-year Treasury securities and the permissible range of rates used to calculate current

liability are as follows:

For Plan Years

Beginning In

Treasury Weighted Average Rates

30-Year Treasury

Weighted Average

Permissible Range

90% to 105%

May 2021

2.24

2.01 to 2.35

under § 417(e)(3)(D) are segment rates

computed without regard to a 24-month

average. Notice 2007-81 provides guidelines for determining the minimum pres-

ent value segment rates. Pursuant to that

notice, the minimum present value segment rates determined for April2021 are

as follows:

MINIMUM PRESENT VALUE

SEGMENT RATES

In general, the applicable interest rates

Month

April 2021

Minimum Present Value Segment Rates

First Segment

Second Segment

0.67

2.84

DRAFTING INFORMATION

The principal author of this notice

isTom Morgan of the Office of the Asso-

June 7, 2021

ciate Chief Counsel (Employee Benefits,

Exempt Organizations, and Employment

Taxes). However, other personnel from

the IRS participated in the development

1192

Third Segment

3.47

of this guidance. For further information

regarding this notice, contact Mr. Morgan

at 202-317-6700 or Paul Stern at 202-3178702 (not toll-free numbers).

Bulletin No. 2021–23

Table 2021-4

Monthly Yield Curve for April2021

Derived from April 2021 Data

Maturity

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

5.5

6.0

6.5

7.0

7.5

8.0

8.5

9.0

9.5

10.0

10.5

11.0

11.5

12.0

12.5

13.0

13.5

14.0

14.5

15.0

15.5

16.0

16.5

17.0

17.5

18.0

18.5

19.0

19.5

20.0

Yield

0.18

0.24

0.31

0.41

0.53

0.68

0.83

0.99

1.16

1.32

1.49

1.65

1.81

1.96

2.11

2.24

2.37

2.49

2.60

2.70

2.79

2.87

2.94

3.01

3.06

3.11

3.16

3.19

3.22

3.25

3.27

3.29

3.31

3.32

3.33

3.34

3.35

3.36

3.36

3.37

Maturity

20.5

21.0

21.5

22.0

22.5

23.0

23.5

24.0

24.5

25.0

25.5

26.0

26.5

27.0

27.5

28.0

28.5

29.0

29.5

30.0

30.5

31.0

31.5

32.0

32.5

33.0

33.5

34.0

34.5

35.0

35.5

36.0

36.5

37.0

37.5

38.0

38.5

39.0

39.5

40.0

Bulletin No. 2021–23

Yield

3.37

3.38

3.38

3.39

3.39

3.39

3.39

3.40

3.40

3.40

3.41

3.41

3.41

3.41

3.42

3.42

3.42

3.43

3.43

3.43

3.44

3.44

3.44

3.45

3.45

3.45

3.45

3.46

3.46

3.46

3.46

3.46

3.47

3.47

3.47

3.47

3.47

3.48

3.48

3.48

Maturity

40.5

41.0

41.5

42.0

42.5

43.0

43.5

44.0

44.5

45.0

45.5

46.0

46.5

47.0

47.5

48.0

48.5

49.0

49.5

50.0

50.5

51.0

51.5

52.0

52.5

53.0

53.5

54.0

54.5

55.0

55.5

56.0

56.5

57.0

57.5

58.0

58.5

59.0

59.5

60.0

Yield

3.48

3.48

3.48

3.49

3.49

3.49

3.49

3.49

3.49

3.49

3.50

3.50

3.50

3.50

3.50

3.50

3.50

3.50

3.51

3.51

3.51

3.51

3.51

3.51

3.51

3.51

3.51

3.52

3.52

3.52

3.52

3.52

3.52

3.52

3.52

3.52

3.52

3.52

3.52

3.53

1193

Maturity

60.5

61.0

61.5

62.0

62.5

63.0

63.5

64.0

64.5

65.0

65.5

66.0

66.5

67.0

67.5

68.0

68.5

69.0

69.5

70.0

70.5

71.0

71.5

72.0

72.5

73.0

73.5

74.0

74.5

75.0

75.5

76.0

76.5

77.0

77.5

78.0

78.5

79.0

79.5

80.0

Yield

3.53

3.53

3.53

3.53

3.53

3.53

3.53

3.53

3.53

3.53

3.53

3.53

3.53

3.54

3.54

3.54

3.54

3.54

3.54

3.54

3.54

3.54

3.54

3.54

3.54

3.54

3.54

3.54

3.54

3.54

3.54

3.54

3.55

3.55

3.55

3.55

3.55

3.55

3.55

3.55

Maturity

80.5

81.0

81.5

82.0

82.5

83.0

83.5

84.0

84.5

85.0

85.5

86.0

86.5

87.0

87.5

88.0

88.5

89.0

89.5

90.0

90.5

91.0

91.5

92.0

92.5

93.0

93.5

94.0

94.5

95.0

95.5

96.0

96.5

97.0

97.5

98.0

98.5

99.0

99.5

100.0

Yield

3.55

3.55

3.55

3.55

3.55

3.55

3.55

3.55

3.55

3.55

3.55

3.55

3.55

3.55

3.55

3.55

3.55

3.56

3.56

3.56

3.56

3.56

3.56

3.56

3.56

3.56

3.56

3.56

3.56

3.56

3.56

3.56

3.56

3.56

3.56

3.56

3.56

3.56

3.56

3.56

June 7, 2021

Reference Price for Section

45I Credit for Production of

Natural Gas from Marginal

Wells During Taxable Years

Beginning in Calendar Year

2020

Notice 2021-34

SECTION 1. PURPOSE

This notice provides the applicable

reference price for qualified natural gas

production from qualified marginal wells

during taxable years beginning in calendar year 2020 for the purpose of determining the marginal well production

credit (MWC) under §45I of the Internal

Revenue Code. The applicable reference

price for taxable years beginning in calendar year 2020 is $1.94 per 1,000 cubic

feet (Mcf).

This notice also provides the credit

amount used for the purpose of determining the MWC for taxable years beginning

in calendar year 2020. The credit amount

is determined using the 2020 inflation adjustment factor of 1.3245 and the applicable reference price of $1.94 per Mcf. The

credit amount for taxable years beginning

in calendar year 2020 is $0.66 per Mcf.

SECTION 2. BACKGROUND

Section 45I(a), as it relates to qualified

natural gas production, provides that, for

purposes of § 38, the MWC for any taxable year is an amount equal to the product of (1) the credit amount and (2) the

qualified natural gas production that is

attributable to the taxpayer.

Section 45I(c)(1) provides that “qualified natural gas production” means domestic natural gas produced from a qualified marginal well. Section 45I(c)(3)(A)

provides that a qualified marginal well is

a domestic well (i) the production from

which during the taxable year is treated as

marginal production under § 613A(c)(6),

or (ii) which, during the taxable year (I)

has average production of not more than

25 barrel-of-oil equivalents per day, and

1

(II) produces water at a rate not less than

95 percent of total well effluent.

Section 613A(c)(6)(D) and (E) provide

that “marginal production” means domestic natural gas produced during any taxable year from a property which is a stripper well property for the calendar year in

which the taxable year begins. A “stripper

well property” is, with respect to any calendar year, any property producing not

more than 15 barrel equivalents per day,

determined by dividing the average daily

production of domestic crude oil and domestic natural gas from producing wells

on the property for such calendar year by

the number of such wells.

Section 45I(c)(2)(A) provides that

generally only the first 1,095 barrels or

barrel-of-oil equivalents (as defined in

§ 45K(d)(5)) produced during the taxable

year qualify for the MWC. This limitation

is proportionately reduced in the case of a

short taxable year or in the case of a well

that is not capable of production each day

of a taxable year. See § 45I(c)(2)(B). The

number of wells on which a taxpayer may

claim the MWC is not limited.

Section 45I(d)(2) provides that to

claim the credit a taxpayer must hold an

operating interest in the qualified marginal well producing the natural gas to which

the credit relates. Under § 45I(d)(1) if a

well is owned by more than one owner

and the natural gas production exceeds the

limitation under § 45I(c)(2), the qualifying natural gas production attributable to

the taxpayer is determined on the basis of

the ratio which taxpayer’s revenue interest

in the production bears to the aggregate of

the revenue interests of all operating interest owners in the production. Finally,

§ 45I(d)(3) provides that the MWC is not

allowable if the taxpayer is also eligible to

claim the § 45K nonconventional sources

credit for the taxable year, unless the taxpayer elects not to claim the credit under

§ 45K for the well.

For purposes of § 45I(a)(1), the credit

amount is 50 cents (adjusted for inflation)

per Mcf of qualified natural gas production (tentative credit amount). See § 45I(b)

(1)(B) and (b)(2)(B).

Section 45I(b)(2)(A) and (B) provide

that the tentative credit amount (adjusted

for inflation) is reduced (but not below

zero) to the extent that the applicable

reference price exceeds $1.67 (adjusted

for inflation). More specifically, § 45I(b)

(2)(A) provides that the tentative credit

amount (adjusted for inflation) is reduced

by an amount which bears the same ratio

to the tentative credit amount (adjusted

for inflation) as the excess (if any) of the

applicable reference price over $1.67 (adjusted for inflation), bears to $0.33 (adjusted for inflation). As a result, the MWC

is not available if the applicable reference

price for qualified natural gas production

is $2.00 (adjusted for inflation) or more.

Section 45I(b)(2)(A) also provides that

the applicable reference price for a taxable

year is the reference price for the calendar

year preceding the calendar year in which

the taxable year begins. Section 45I(b)(2)

(C)(ii) provides that the term “reference

price” means, with respect to any calendar

year, in the case of qualified natural gas

production, the Secretary’s estimate of the

annual average wellhead price per Mcf for

all domestic natural gas.

Section 45I(b)(2)(B) provides that in

the case of any taxable year beginning in a

calendar year after 2005, each of the dollar amounts contained in § 45I(b)(2)(A)

will be increased to an amount equal to

such dollar amount multiplied by the inflation adjustment factor for such calendar

year (determined under § 43(b)(3)(B) by

substituting “2004” for “1990”).

SECTION 3. INFLATION

ADJUSTMENT FACTOR AND

REFERENCE PRICE

.1 Inflation Adjustment. The inflation

adjustment factor under § 45I(b)(2)(B) for

calendar year 2020 is 1.3245.

.2 Reference Price. The Secretary’s

estimate of the calendar year 2019 annual average wellhead price per Mcf for

all domestic natural gas under § 45I(b)

(2)(C)(ii) was calculated by applying

the Producer Price Index commodity index for “Natural Gas from the Wellhead”

(WPU053101051)1 published by the Bureau of Labor Statistics (BLS) as part of its

Producer Price Index program, to the 2018

annual average wellhead price ($2.55)

https://data.bls.gov/cgi-bin/srgate. The BLS publishes indexes and not actual or average prices.

June 7, 2021

1194

Bulletin No. 2021–23

published in Notice 2020-34, 2020-21

I.R.B. 838. The annual Producer Price

Index commodity index for natural gas

published by the BLS was 79.3 in 2018

and 60.4 in 2019, which implies a ratio of

2019 to 2018 average wellhead prices of

0.762 (60.4 / 79.3). Therefore, the Secretary’s estimate of the calendar year 2019

annual average wellhead price per Mcf for

all domestic natural gas is $1.94 per Mcf

(0.762 x $2.55 per Mcf).

For years after 2019, the Secretary intends to continue calculating the reference

price by application of the Producer Price

Index commodity index for “Natural Gas

from the Wellhead” (WPU053101051)

published by the BLS to the previous

year’s reference price.

Bulletin No. 2021–23

SECTION 4. CALCULATION OF

CREDIT AMOUNT

Under § 45I(b)(1)(B) and (2)(B), the

tentative credit amount used to calculate

the MWC for taxable years beginning in

calendar year 2020 is 66 cents per Mcf

($0.50 x 1.3245 inflation adjustment factor). Because the applicable reference

price ($1.94) does not exceed $2.21 ($1.67

x 1.3245 inflation adjustment factor),

there is no reduction in the tentative credit

amount under § 45I(b)(2)(A). Therefore,

the credit amount used to calculate the

MWC for taxable years beginning in calendar year 2020 is $0.66 per Mcf.

1195

SECTION 5. EFFECTIVE DATE

This notice is effective for qualified

natural gas production during taxable

years beginning in calendar year 2020.

SECTION 6. DRAFTING AND

CONTACT INFORMATION

The principal author of this notice is

Charles Hyde of the Office of Associate

Chief Counsel (Passthroughs & Special

Industries). For further information regarding this notice contact Mr. Hyde at

(202) 317-6853 (not a toll-free number).

June 7, 2021

Part IV

U.S.-Switzerland Competent Authority Arrangement

Announcement 2021-11

The following is a copy of the Competent Authority Arrangement entered into by the competent authorities of the United States of

America and Switzerland under paragraph 3 of Article 25 (Mutual Agreement Procedure) regarding certain U.S. and Swiss pension

or other retirement arrangements, including individual retirement savings plans, that may be eligible for benefits under paragraph 3

of Article 10 (Dividends) of the Convention Between the United States of America and the Swiss Confederation for the Avoidance

of Double Taxation with Respect to Taxes on Income signed at Washington on October 2, 1996, as amended by the Protocol, signed

on September 23, 2009.

The text of the Competent Authority Arrangement is as follows:

COMPETENT AUTHORITY ARRANGEMENT

The competent authorities of the United States and Switzerland hereby enter into the following arrangement (Arrangement) regarding

certain U.S. and Swiss pension or other retirement arrangements, including individual retirement savings plans, that may be eligible

for benefits under paragraph 3 of Article 10 (Dividends) of the Convention Between the United States of America and the Swiss

Confederation for the Avoidance of Double Taxation with Respect to Taxes on Income signed at Washington on October 2, 1996,

as amended by the Protocol, signed on September 23, 2009 (Treaty). This Arrangement is entered into under paragraph 3 of Article

25 (Mutual Agreement Procedure) of the Treaty and supersedes the competent authority arrangement entered into on December 10,

2004, I.R.B. 2004-146.

1. New paragraph 3 of Article 10 (Dividends) of the Treaty

Article 1 of the Protocol deleted and replaced paragraph 3 of Article 10 (Dividends) to expand its scope from applying only to pension

and other retirement arrangements to also including individual retirement savings plans, provided that all other requirements of the

Treaty are satisfied. New paragraph 3 of Article 10 states:

 otwithstanding paragraph 2, dividends may not be taxed in the Contracting State of which the company paying the dividends

N

is a resident if the beneficial owner of the dividends is a pension or other retirement arrangement which is a resident of the other

Contracting State, or an individual retirement savings plan set up in, and owned by a resident of, the other Contracting State, and

the competent authorities of the Contracting States agree that the pension or retirement arrangement, or the individual retirement

savings plan, in a Contracting State generally corresponds to a pension or other retirement arrangement, or to an individual retirement savings plan, recognized for tax purposes in the other Contracting State. This paragraph shall not apply if such pension or

retirement arrangement, or such individual retirement savings plan, controls the company paying the dividends.

2. Qualified U.S. pension or other retirement arrangements

The following arrangements are U.S. pension or other retirement arrangements that will qualify for benefits under Article 10(3) provided that they do not control the Swiss company paying the dividend and that they satisfy all additional applicable requirements set

forth in the Treaty, including Article 22 (Limitation on Benefits):

a)

A trust providing pension or retirement benefits under a Code section 401(a) qualified pension plan (which includes a Code section 401(k) plan) and a profit sharing or stock bonus plan;

b) A trust described in Code section 457(g) providing pension or retirement benefits under a Code section 457(b) plan;

c)

A Code section 403(a) qualified annuity plan and a Code section 403(b) plan;

d) A group trust described in IRS Revenue Ruling 81-100 (as amended by IRS Revenue Ruling 2014-24 and IRS Revenue Ruling

2011-1), provided that it is operated exclusively or almost exclusively to earn income for the benefit of pension funds that are

themselves entitled to benefits under the Treaty as a resident of the United States;

e)

The Thrift Savings Fund (Code section 7701(j)).

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3. Qualified U.S. individual retirement savings plans

The following arrangements are U.S. individual retirement savings plan that will qualify for benefits under Article 10(3) provided

that they do not control the Swiss company paying the dividend and that they satisfy all additional applicable requirements set forth

in the Treaty, including Article 22:

a)

A trust that is an individual retirement account under Code section 408;

b) A Roth individual retirement account under Code section 408A;

c)

A simple retirement account under Code section 408(p); and

d) A trust providing pension or retirement benefits under a simplified employee pension plan under Code section 408(k).

4. Qualified Swiss pension or other retirement arrangements

The following arrangements are Swiss pension or other retirement arrangements that will qualify for benefits under Article 10(3)

provided that they do not control the U.S. company paying the dividend and that they satisfy all additional applicable requirements

set forth in the Treaty, including Article 22:

a)

A Swiss resident pension or other retirement arrangement that has been established in accordance with the Federal Act on old

age, survivors’ and disabled persons’ insurance payable in respect of employment or self-employment of 25 June 1982, including

a retirement arrangement covered by:

i.

the Federal Act on Vested Benefits of 17 December 1993;

ii. paragraph 6 and paragraph 7 of Article 89a of the Swiss Civil Code of 10 December 1907; and

iii. any arrangement covered by paragraph 1 of Article 331 of the Federal Act on the Amendment of the Swiss Civil Code (Part

Five: The Code of Obligations) of 30 March 1911.

5. Qualified Swiss individual retirement savings plans

The following arrangements are Swiss individual retirement savings plans that will qualify for benefits under Article 10(3) provided

that they do not control the U.S. company paying the dividend and that they satisfy all additional applicable requirements set forth in

the Treaty, including Article 22:

a)

Any arrangement covered by the Federal Act on old age, survivors’ and disabled persons’ insurance payable in respect of employment or self-employment of 25 June 1982, including individual recognized pension plans comparable with occupational

pension plans.

6. Not an exclusive list; verification

The pension or other retirement arrangements and individual retirement savings plans described in paragraphs 2 through 5, above,

are not intended to be exclusive. Any U.S. or Swiss pension or other retirement arrangement, or individual retirement savings plan,

not mentioned above, including any such arrangement or plan established pursuant to legislation enacted after the date of signature

of this Arrangement may present its case to the U.S. and Swiss Competent Authorities pursuant to paragraph 3 of Article 25 (Mutual

Agreement Procedure) to determine whether it qualifies for benefits under paragraph 3 of Article 10, provided it has satisfied all additional applicable requirements set forth in the Treaty, including Article 22.

7. Effective date

Upon signature by the U.S. and Swiss competent authorities, this Arrangement is effective for dividends paid on or after January 1,

2020, and supersedes the competent authority arrangement entered into on December 10, 2004, I.R.B. 2004-146.

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Agreed to by the undersigned competent authorities:

/s/

___________________________

/s/

_________________________

Douglas W. O’Donnell

United Sta

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