IRS Extends COBRA Election and Premium Payment Deadlines
IRS Extends COBRA Election and Premium Payment Deadlines
The IRS issued Notice 2021-58, which extended COBRA election and premium payment deadlines.
Notice provides further guidance on a Joint Notice issued by the Department of Labor, the Department of the Treasury, and the IRS on May 4, 2020. The Joint Notice provided the extensions to the following COBRA deadlines:
- 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
- The date for providing a COBRA election notice for group health plans and their sponsors and administrators
Under issued guidance, the COBRA deadlines were disregarded until the earlier of:
- One year from the date an individual and plan were first eligible; or
- The end of the Outbreak Period (which, as of this writing, remains ongoing)
Some employers had questioned if the disregarded period for someone to elect COBRA and the disregarded period for the same person to make their COBRA premium payments run simultaneously. Today’s Notice clarifies that they do. The Notice gives the following rules to individuals making their first COBRA premium payment:
- If the individual elected COBRA outside of their initial 60-day election timeframe, they will generally have one year and 105 days (the 60-day election period and the 45-day initial payment period) after the date the COBRA notice was provided to make their first premium payment.
- If the individual elected COBRA within the initial 60-day election timeframe, they will have one year and 45 days after the date of the election to make their first premium payment.
The initial COBRA election must still be made by the earlier of:
- One year and 60 days after the individual receives their COBRA election notice; or
- The end of the Outbreak Period
Because the previous guidance was unclear, this Notice also provides relief for individuals that assumed the disregarded period for the first premium payment began on the date they made their COBRA election. To “avoid inequitable outcomes, the Notice creates an exception and states the first COBRA premium payment cannot be due before November 1, 2021, even if this date is more than one year and 105 days after the individual received the election notice.
For every other premium payment, the maximum time to make a payment while the Outbreak Period continues is one year from the date the payment would have been due, including the mandatory 30-day grace period.
To help clarify, the Notice gives the following example:
Individual A has a qualifying event and receives the COBRA election notice on April 1, 2020. The elect continuation coverage on October 1, 2020, retroactive to April 1, 2020. AS of July 15, 2021, they have not made the initial premium payment. When must they make the initial premium payment to make coverage retroactive to April 1, 2020?
Individual A has until November 1, 2021, to make the initial premium payment, even though it is more than one year and 105 days after April 1, 2020. Although the disregarded period for the COBRA election and premium payment run concurrently, under the relief provided in this Notice, the individual will not be required to make the initial premium payment before November 1, 2021, as long as the individual makes the initial premium payment within one year and 45 days before the date of election. November 1, 2021 is less than one year and 45 days after October 1, 2020. The initial COBRA premium payment would include the monthly premium payments for April 2020 through October 2020. The November 2020 premium payment would be due by December 1, 2021 (one year and 30 days after November 1, 2020), with premium payments due every month after that for the months Individual A is eligible for COBRA continuation coverage.
What About ARPA COBRA Premium Assistance
The Notice makes clear that the timeframes under the Emergency Relief Notices do not apply to the American Rescue Plan Act (ARPA) extended election period or COBRA premium assistance notices that had to be distributed earlier this year. However, they do apply to payments of COBRA premiums after the end of the ARPA premium assistance period, assuming the individual is still eligible for COBRA and the Outbreak Period has not ended.
Again, the Notice provides the following example to show how these rules work with COBRA subsidies:
On November 1, 2020, Individual C has a qualifying event and is a potential Assistance Eligible Individual. They receive their COBRA election notice on the same day. On April 30, 2021, Individual C receives the notice of the ARPA extended election period. On May 31, 2021, Individual C elects both retroactive COBRA continuation coverage beginning on November 1, 2020, and COBRA continuation coverage with premium assistance beginning on or after April 1, 2021. When are the deadlines for Individual C to make the initial COBRA premium payment and subsequent monthly payments?
Individual C has until February 14, 2022, to make the initial COBRA premium payment (one year and 105 days after November 1, 2020). The initial COBRA premium payment would include premium payments for November 2020 through January 2020. The February 2021 premium payment would be due by March 3, 2022 (one year and 30 days after February 1, 2021). 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 Individual C is eligible for COBRA, except that no payments would be due for the period beginning on or after April 1, 2021, through September 30, 2021.
The Notice does not explicitly state how the April 1, 2021-September 30, 2021 payment should be made. Under the COBRA premium subsidies, which expired September 30, 2021, required employers to provide a 100% COBRA subsidy for all Assistance Eligible Individuals (AEIs). Employers could then claim an employer tax credit. It is assumed that the same process will apply for AEIs that take advantage of these new deadlines. That means employers may still need to be prepared to provide a COBRA subsidy well into 2022.
There are many other examples given in the Notice about how to comply with these new timeframes.