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COBRA Premium Assistance Credit

Internal Revenue Manual Part 3. Submission Processing · 2026-10-03 edition · updated 2026-10-04 · United States

The American Rescue Plan Act of 2021(ARP), provided for COBRA premium assistance in the form of a full reduction in the premium otherwise payable by certain individuals and their families who elect COBRA continuation coverage due to a loss of coverage as the result of a reduction in hours or an involuntary termination of employment.

COBRA premium assistance was available for periods of coverage beginning on or after April 1, 2021, through periods of coverage beginning on or before September 30, 2021.

Section 9501(b) of ARP added new IRC 6432 allowing a credit (COBRA premium assistance credit) against the employer share of Medicare tax (or the equivalent portion of Tier 1 RRTA taxes) for each calendar quarter in an amount equal to the premiums not paid by assistance eligible individuals for COBRA continuation coverage.

This credit could have been claimed on employment tax returns for the second, third or fourth quarter of 2021 depending on when the employer (or other person) became entitled to the credit.

Employers eligible to claim the COBRA premium assistance credit could have reduced federal tax deposits by an amount equal to (or less than) their anticipated associated employment tax credit.

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▸Contents — Internal Revenue Manual Part 3. Submission Processing
Internal Revenue Manual Part 3. Submission Processing

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