How should an employer claim a tax credit for ARPA premium assistance during a quarter when they did not learn about a qualified beneficiary’s eligibility until a subsequent quarter?

ARPA’s premium subsidy period begins on April 1, 2021, and ends on September 30, 2021, so it covers the entire second and third quarters of the calendar year. Since individuals have up to 60 days to notify employers that they are assistance eligible individuals (AEIs), it is possible that they would not provide that notice of premium assistance for the second quarter until after the third quarter has already begun. For instance, an individual might be laid off on May 31, 2021, but not notify the plan of the need for assistance beginning on June 1, 2021 (during the second quarter) until July 15, 2021 (during the third quarter).

Employers claim their credit for providing premium assistance on Form 941, which is filed on a quarterly basis. If the employer provided COBRA subsidies to eligible beneficiaries in April, May and June, the ARPA tax credit for these amounts should be claimed on the second quarter Form 941 due August 2. Under normal circumstances, any corrections to information provided in a Form 941 must be made by filing Form 941-X. However, IRS guidance indicates that the employer becomes eligible to claim the credit once they become aware of the AEI's eligibility and the qualified beneficiaries' premiums are paid for them. So, if an employer is notified in the third quarter of an employee's eligibility for the second quarter, they can claim the credit for the third quarter by filing in the fourth quarter. To continue with the example above, the employer could claim the credit for the month of June, as well as any months in the third quarter during which the AEI received premium assistance, on the Form 941 filed for the third quarter (which is due on October 31).

Employers should consult with their tax or payroll advisors concerning any specific issues with filing Form 941.