Seyfarth Synopsis: The IRS has attempted to provide clarity (following the DOL’s earlier attempt) on how the coronavirus Outbreak Period will work and how it applies to COBRA election and premium payment deadlines, in Notice 2021-58.
At the beginning of the COVID-19 National Emergency, in May of 2020, the Department of Labor (DOL) and the Internal Revenue Service (IRS) issued a Joint Notice that extended certain timeframes applicable to COBRA continuation coverage under a group health plan by requiring plans to disregard the period from March 1, 2020 until 60 days after the announced end of the COVID National Emergency or such other date announced by the relevant agencies (the “Outbreak Period“). (See our prior legal update).
The Joint Notice provided extensions for the following COBRA timeframes:
The 60-day election period for COBRA continuation coverage,
The dates for making COBRA premium payments,
The date for individuals to notify the plan of a qualifying event or determination of disability, and
The date for providing a COBRA election notice for group health plans.
In February of 2021, we explained how the DOL clarified that the extensions would apply separately to each individual and would last until the earlier of (1) one year from the date relief was first available (e.g. an individual’s original election due date or payment due date), or (2) the end of the Outbreak Period. At the end of this disregarded period, the applicable timeframes that were disregarded resume.
Recently the IRS issued Notice 2021-58 to clarify certain questions that have arisen as to how the disregarded period applies to COBRA election and premium payment deadlines.
COBRA Payment Deadlines
We now know that the periods run concurrently. For example, an individual may not delay electing COBRA for a year and then add another year to make payment. The following timeframes will apply to individuals making initial COBRA premium payments:
If an individual elected COBRA continuation coverage more than 60 days after receipt of the COBRA election notice, that individual generally will have one year and 105 days after the date COBRA notice was provided1 to make the initial COBRA premium payment.
If an individual elected COBRA continuation coverage within 60 days of receipt of the COBRA election notice, that individual will have one year and 45 days after the date of the COBRA election to make the initial COBRA premium payment.
For each subsequent COBRA premium payment, the maximum time an individual has to make a payment while the Outbreak Period continues is one year from the date the payment originally would have been due in the absence of previous extensions, but subject to the transition relief provided below.
Transitional Relief for COBRA Payments
Despite the new guidance that the periods run concurrently, an individual cannot be required to make an initial premium payment before November 1, 2021 (even if November 1, 2021 is more than one year and 105 days after the election notice is received), provided that the individual makes the initial payment within one year and 45 days after the date of the election.
Coordination With ARPA’s COBRA Subsidy
The American Rescue Plan Act (ARPA) provided a temporary 100% COBRA premium subsidy for “Assistance Eligible Individuals” for periods of coverage beginning on or after April 1, 2021 through September 30, 2021.
ARPA also gave individuals who either (a) were eligible for COBRA but did not elect COBRA as of April 1, 2021, or (b) elected and discontinued COBRA coverage before April 1, 2021 another chance to elect COBRA during the period beginning April l, 2021 and ending 60 days after notice of the “extended election period” is received. Employers were required to give notice of this extended election period (ARPA Notice) by May 31, 2021. (See legal update).
Notice 2021-58 reiterates that the extensions of the timeframes do not apply to the periods for providing the required ARPA Notice, or for electing subsidized COBRA. A plan may require an individual to elect COBRA retroactive to the date of loss of coverage within 60 days of receiving the ARPA Notice or lose eligibility for retroactive COBRA. For example, an individual who receives a COBRA election notice on August 1, 2020 would have until September 30, 2021 (one year and 60 days) to elect COBRA retroactive to August 1, 2020. But if the individual elects subsidized COBRA under ARPA, the individual would only have 60 days after the receipt of the ARPA Notice to elect retroactive COBRA coverage. If the individual receives the ARPA Notice on May 31, 2021 and elects subsidized COBRA beginning April 1, 2021, but does not elect retroactive COBRA, the individual cannot later elect retroactive COBRA.
Payment for Retroactive COBRA under ARPA
Notably, the disregarded periods continue to apply to payments of COBRA premiums after subsidized COBRA ends, to the extent that the individual is still eligible for COBRA continuation coverage and the Outbreak Period has not ended. Notice 2021-58 provides this example:
On November 1, 2020, Charley is involuntarily terminated and receives a COBRA election notice. On April 30, 2021, Charley receives notice of the ARPA extended election period. On May 31, 2021, Charley elects both retroactive COBRA coverage beginning on November 1, 2020, and subsidized COBRA beginning April 1, 2021.
Charley has until February 14, 2022 to make the initial COBRA premium payment (one year and 105 days after November 1, 2020). The initial COBRA payment would include premium payments for November 2020 through January 2021. The February 2021 premium payment would be due by March 3, 2022 (one year and 30 days after February 1, 2021), and the March 2021 premium payment would be due by March 31, 2022 (one year and 30 days after March 1, 2021). Premium payments would be due every month after that for the months Charley is eligible for COBRA coverage, except that no payments would be due for the periods beginning on or after April 1, 2021, through September 30, 2021.
Other helpful examples are provided that should help plan administrators and COBRA administrators in collecting COBRA premium payments. Please contact the employee benefits attorney at Seyfarth Shaw LLP with whom you usually work if you have any questions.
The Notice uses both the date “provided” and the date “received” in explaining when the initial COBRA premium must be paid. Additional clarification as to whether “provided” means the date sent or date received would be helpful.