IRS Guidance Clarifies COBRA Election and Payment Extensions
IRS Notice 2021-58, released on October 6, 2021, clarifies prior regulations that extended deadlines for participants to elect COBRA coverage and pay COBRA premiums. It also addresses the interaction with the COBRA premium assistance available for certain individuals under the American Rescue Plan Act of 2021 (ARP). This Alert summarizes the key guidance provided in Notice 2021-58 (“the Notice”).
COBRA permits qualified beneficiaries who lose coverage under a group health plan to elect continuation health coverage during the 60-day period after receipt of a COBRA election notice. Under the law, the initial COBRA premium payment is due within 45 days after the date of election of COBRA coverage. Additionally, group health plans must treat COBRA premium payments as timely paid if made within 30 days after the due date.
The latest IRS notice is related to:
- The Department of Labor (DOL), the Department of the Treasury (Treasury Department), and the Internal Revenue Service (IRS), collectively the “Agencies” issuing on May 4, 2020, the Joint Notification of Extensions of Certain Timeframes for Employee Benefit Plans, Participants, and Beneficiaries Affected by the COVID-19 Outbreak (Joint Notice);
- Additional guidance issued on February 26, 2021, provided by Employee Benefits Security Administration (EBSA) Disaster Relief Notice 2021-01 (collectively the “Emergency Relief Notices”) extended certain timeframes otherwise applicable to welfare and pension plans, including group health plans, and their participants and beneficiaries under the Employee Retirement Income Security Act of 1974 (ERISA) and the Internal Revenue Code (Code). The extension required such plans to disregard the period for certain actions from March 1, 2020, until 60 days after the announced end of the National Emergency or such other date announced by the Agencies in a future notification, subject to a maximum disregarded period of one year.1 See our prior alert, Extension of Certain Timeframes for Group Health Plans, Pension Plans, Participants, and Beneficiaries Affected by the COVID-19 Outbreak, for additional details;
- Section 9501 of the ARP enacted on March 11, 2021, provides for temporary COBRA premium assistance for certain “Assistance Eligible Individuals” for periods of coverage occurring during the six-month period beginning April 1, 2021, and ending September 30, 2021; and
- Notice 2021-31, issued on May 18, 2021, the IRS and the Treasury Department regarding COBRA continuation coverage and COBRA premium assistance under the ARP. See our prior alert, Agencies Issue Additional Guidance on the 100% COBRA Subsidy, for additional details.
Clarifications Explained in Notice 2021-58
- Maximum extended election period and payment periods:
As a reminder, the COBRA election and premium payment extensions end 60 days after the end of the National Public Health Emergency Period, but not more than one year from the date of the event. Since there are two possible extensions (one to make the election and another to make the payment), the notice clarifies that these extension periods generally run concurrently.
- If an individual elects COBRA continuation coverage within the initial 60-day COBRA election timeframe, that individual will have one year and 45 days after the date they made their COBRA election to pay their initial COBRA premium payment.
- If an individual elects COBRA continuation coverage outside of the initial 60-day COBRA election timeframe, that individual will have at most one year and 105 days after the date the COBRA notice was originally provided to both elect and make the initial COBRA premium payment.
Individuals may not have more than a one-year extension period for their election and initial payment combined. For example, an individual could not delay a COBRA election for six months and then add another full year for making the initial COBRA payment. Instead, the maximum disregarded period of one year is applied concurrently.
For each subsequent COBRA premium payment, the maximum time the individual has to make a payment until 60 days after the national emergency ends (or another date announced by the agencies) is one year from the date the payment originally would have been due (the one year includes the mandatory 30-day grace period). However, these timeframes are subject to the transition relief afforded by the Notice, discussed below.
- Exception for COBRA premium payments due before November 1, 2021 under the Emergency Relief Notices: The Notice provides an exception to the general rule of a maximum of one year extension for both COBRA elections and initial COBRA payments. Under this transition relief, in no event will an individual be required to make the initial premium payment before November 1, 2021, even if November 1, 2021 is more than one year and 105 days after the date the election notice was received, provided however that the individual makes the initial premium payment within one year and 45 days after the date of the election. See examples 5 and 6 of the notice.
- Interaction with the ARP COBRA Premium Assistance (federally subsidized COBRA coverage):
- For an individual who did not elect COBRA premium assistance, the election of COBRA premium assistance was also the date by which a retroactive election for COBRA coverage needed to be made. For example, if an individual had a qualifying event on March 1, 2021, that is an involuntary termination of employment, and thereby became eligible for premium assistance on April 1, 2021, the date of election of the premium assistance was also the date that COBRA coverage back to March 1, 2021, had to be elected.
- For an individual who did not elect COBRA premium assistance, they still have the time allowed by the Emergency Relief Notices to elect COBRA, but can no longer elect COBRA premium assistance. For example, if an individual had an involuntary termination of employment on October 1, 2020, received a COBRA election notice on that date, received a COBRA extended election period notice on May 1, 2021, but does not elect premium assistance and has made no election by September 1, 2021, then the individual had until November 30, 2021, to elect retroactive coverage to October 1, 2020, and until January 14, 2022, to pay the initial premiums.
- The extensions continue to apply to payments of COBRA premiums after the end of the ARP COBRA premium assistance period (since each payment has a one-year extension), to the extent that the individual is still eligible for COBRA continuation coverage, and it is not yet 60 days after the national emergency ends (or another date announced by the agencies).
Cheiron consultants can assist you with your compliance with the COBRA extended election, premium payment, and premium assistance rules.
Cheiron is an actuarial consulting firm that provides actuarial and consulting advice. However, we are neither attorneys nor accountants. Accordingly, we do not provide legal services or tax advice.
1The Joint Notice provided extensions for the following COBRA timeframes:
- The 60-day election period for COBRA continuation coverage under section 605 of ERISA and section 4980B(f)(5) of the Code,
- The dates for making COBRA premium payments under section 602(2)(C) and (3) of ERISA and section 4980B(f)(2)(B)(iii) and (C) of the Code,
- The date for individuals to notify the plan of a qualifying event or determination of disability under section 606(a)(3) of ERISA and section 4980B(f)(6)(C) of the Code, and
- The date for providing a COBRA election notice under section 606(c) of ERISA and section 4980B(f)(6)(D) of the Code for group health plans and their sponsors and administrators.