On October 6, 2021, the IRS issued Notice 2021-58 which further clarifies the DOL and IRS emergency relief published in 2020 and DOL Disaster Relief Notice 2021-01 as it relates to COBRA enrollment and initial premium payment deadlines. The Notice also addresses the interaction of the American Rescue Plan Act (ARPA) COBRA subsidy with the emergency deadline relief. For additional information on prior guidance, links to our previous blogs are provided at the end of this article.
COBRA Deadline Relief
To determine the deadlines to enroll in COBRA or make premium payments, employers and service providers are to disregard the period of time beginning on March 1, 2020 (or later), until the earlier of:
- One year from the date the individuals and plans were first eligible for relief, or
- 60 days after the announced end of the COVID-19 National Emergency (e.g., the end of Outbreak Period). The President has not announced the end of the pandemic yet.
COBRA Elections and Initial Payments
There were many questions from employers and practitioners on administering the initial COBRA enrollment and the initial and subsequent payment deadlines. The IRS has clarified that the disregarded time period for COBRA enrollment and the initial and subsequent premium payments runs concurrently.
Under standard COBRA law, “qualified beneficiaries” (QB) who lose their health coverage due to a qualifying event have 60 days to elect COBRA. Once they make their election and enroll in COBRA, they have 45 days to make their initial COBRA premium payment. The IRS provides the following guidance for the extended deadlines for initial payments based on when the QBs elect COBRA:
- COBRA elected outside of the initial 60-day election timeframe – the QB will have one year and 105 days after the date the COBRA notice was provided to make the initial COBRA premium payment.
- Example – on August 1, 2020, Individual A has a qualifying event and receives a COBRA election notice. The original 60 day election period ended on September 30, 2020; however, because of the extended deadline relief, the new deadline to enroll is September 30, 2021. Individual A elects COBRA on February 1, 2021, retroactive to August 1, 2020. Individual A has until November 14, 2021 (one year plus 105 days after August 1, 2020) to make the initial COBRA premium payment. The initial payment would include payments for August 2020 through October 2020. The November 2020 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 that Individual A is eligible for COBRA coverage.
- COBRA elected within the initial 60-day election timeframe – the individual will have one year and 45 days after the date of the COBRA election to make the initial COBRA premium payment.
- Example – on October 1, 2020, Individual B has a qualifying event and receives a COBRA election notice. Individual B elects COBRA on October 15, 2020, retroactive to October 1, 2020. Individual B has until November 29, 2021 (one year plus 45 days after October 15, 2020) to make the initial COBRA premium payment. The initial payment would include payment for only October 2020. The November 2020 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 that Individual B is eligible for COBRA coverage.
By applying the disregarded periods in this manner, the IRS states that any qualified beneficiary delaying their COBRA election will not have more than one year of total disregarded time for the election and the initial payment.
Because the IRS is just now clarifying this rule, qualified beneficiaries who made their COBRA elections more than 60 days after the election notices were provided may have less time than anticipated to make their initial payment. For this reason, the IRS is allowing all qualified beneficiaries to make their initial premium payment no sooner than November 1, 2021, even if that is more than one year and 105 days after the election notice was provided. However, the initial payment must be made no later than one year and 45 days after the COBRA election was made.
- Example – on April 1, 2020, Individual A has a qualifying event, receives the COBRA notice, and elects COBRA on October 1, 2020, retroactive to April 1, 2020. Under the new deadline rules discussed above, for those that elect COBRA outside of the initial 60-day election period, this individual would have had to make the initial payment on July 15, 2021. However, because of the transition period, this individual can make the initial payment by November 1, 2021. Also, November 1, 2021. does not exceed the maximum timeframe of one year and 45 days from the COBRA election date, or November 15, 2021. The initial payment would include the monthly premium payments for April 2020 through October 2020. The November 2020 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 that Individual A is eligible for COBRA coverage. Note in this example, the 18-month COBRA coverage period expired on September 30, 2021. but payments for retroactive coverage will continue through September 2022. See Example 6 in the Notice where the one-year-and-45-days limit is met before November 1, 2021.
Interaction of COBRA Deadline Relief and the COBRA Subsidy
The extended COBRA deadline relief discussed above did not apply to the COBRA subsidy election. Assistance Eligible Individuals (AEIs) were required to elect COBRA within 60 days of receiving the ARPA COBRA subsidy election notices. If an AEI’s COBRA qualifying event date was before April 1, 2021, but they enrolled in COBRA and the subsidy effective April 1, 2021, or later, they can no longer retroactively enroll in COBRA back to their original qualifying event date.
The extended deadline relief continues to apply to COBRA premium payments after September 30, 2021, to the extent that the individual is still eligible for COBRA coverage and the Outbreak Period has not ended.
- Example – Individual A has a qualifying event that is an involuntary termination on August 1, 2020, and received a COBRA election notice on the same date. On May 31, 2021, Individual A also received the ARPA extended election notice. As of September 1, 2021, Individual A has not enrolled in COBRA. Because this individual missed the deadline to enroll in COBRA and the subsidy, (the deadline was July 30, 2021), they are not eligible for the subsidy. Individual A may still enroll in COBRA retroactively to August 1, 2020, as long as they elect COBRA no later than September 30, 2021 (one year and 60 days after August 1, 2020). Their initial payment is due no later than November 14, 2021 (one year and 105 days after August 1, 2020). The initial payment would include monthly premium payments for August 2020 through October 2020. The November 1, 2020 premium payment would be due December 1, 2021 (one year and 30 days after November 1, 2020), with premium payments due every month after that for the months that Individual A is eligible for COBRA coverage.
The Notice provides many examples that should help determine COBRA extended deadlines. Employers and service providers will find the guidance helpful to ensure that all qualified beneficiaries can enroll and make initial and subsequent premium payments by the deadlines specified above. The IRS did not indicate that a notice explaining these particular clarified deadlines should be provided to affected individuals. However, employers and service providers should consider sending a supplemental notice as suggested by the DOL in their Disaster Relief Notice 2021-01.
Previous blog links on relief guidance:
- Government Agencies Provide Deadline Relief for Health and Welfare Employee Benefit – Original DOL and IRS guidance
- Department of Labor Issues Additional Guidance on Outbreak Period – Disaster Relief Notice 2021-01
Previous blog links on the COBRA subsidy:
- ARPA COBRA Subsidy Ending Soon
- IRS Issues Additional ARPA COBRA Subsidy Guidance Notice 2021-46
- IRS Notice 2021-31: Subsidy Calculation and Claiming the Credit
- Overview of IRS Guidance for COBRA Subsidy under ARPA
- IRS Guidance for COBRA Subsidy: Involuntary Terminations and Reduction of Hours
- DOL Provides Model Notices and FAQs for ARPA COBRA Subsidy
- COBRA Premium Subsidy Under the American Rescue Plan Act of 2021
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