§6432 Continuation Coverage Premium Assistance

Summary

Employers, insurers, or multiemployer plans can get a tax credit for continuation-coverage premiums they did not collect from people who were eligible for free coverage under the American Rescue Plan (section 9501(a)(1)). Who gets the credit is usually the multiemployer plan itself, the employer that runs a group health plan that is covered by COBRA/ERISA/PHSA or that is not fully insured, or the insurer for other group plans. The credit is limited to the employer’s Social Security tax for the quarter (the tax in section 3111(b), or the part of the tax in section 3221(a) that matches that rate), reduced by any credits under sections 3131, 3132, and 3134. If the credit is bigger than that limit, the extra amount is refunded. The credit can be paid in advance (using forms from the Secretary) up to the end of the most recent payroll period in the quarter, and penalties for missed deposits may be waived if they were due to expecting the credit. If someone claims too much credit, the extra paid will be treated as unpaid tax and can be collected. The word “person” for this credit includes state or local governments, Indian tribal governments, their agencies, and certain federal instrumentalities described in section 501(c)(1) and exempt under section 501(a). A recipient must add the credit amount to gross income for the tax year that includes the last day of the quarter. No credit is allowed for amounts already counted as qualified wages or benefits under CARES Act section 2301, section 3134, FFCRA sections 7001(d) or 7003(d), or sections 3131 or 3132. The IRS has five years after the later of the return filing date or the date the return is treated as filed to assess amounts related to this credit. The Secretary will issue rules and forms for reporting, verifying reimbursements, advance payments, reconciliation, special rules for multiemployer plans, and allowing third-party payors (like PEOs) to take the credit.