IRS Notice 2021-58
clarifies the application of certain COBRA deadline extensions for electing COBRA coverage and paying COBRA premiums under prior
relief that was issued as a result of the COVID-19 outbreak (“Emergency
Relief”). Under the Emergency Relief, up to one year must be disregarded in
determining the due dates for individuals to elect COBRA coverage and pay COBRA
premiums during the Outbreak Period (i.e., 60 days after the announced end of
the National Emergency).
Notice 2021-58 clarifies that the disregarded
periods to elect COBRA coverage and make initial and subsequent COBRA premium
payments generally run concurrently.
The guidance provides the following rules to illustrate the applicable time frames:· If
an individual elected COBRA coverage within the initial 60-day COBRA election
time frame, they will have one year and
45 days after the date of the election to make their initial COBRA premium
payment.
·
If an individual elected COBRA coverage outside
of the initial 60-day COBRA election time frame, they generally will have one year and 105 days after the date the
COBRA notice was provided to make the initial COBRA premium payment
(subject to transition relief).
The
guidance also addresses the interaction of the Emergency Relief with the COBRA
subsidies that were made available for certain eligible individuals under the
American Rescue Plan Act (ARPA).
Action Steps
Employers should carefully review the guidance and consult
benefits counsel to ensure their ongoing compliance with the Emergency Relief,
as clarified by Notice 2021-58.
Individuals must make the initial COBRA election by the
earlier of:
·
One year and 60 days after the individual’s
receipt of the COBRA election notice; or
·
The end of the Outbreak Period.
Applying the disregarded periods in this way means that
individuals who delay electing COBRA may not have more than one year of total
disregarded time for the COBRA election and initial COBRA payment. For example,
an individual generally may not delay electing COBRA coverage for six months
and then add another full year to the disregarded period for purposes of
determining the deadline for making the initial COBRA premium payment
(resulting in a total of 18 months of disregarded time for both the COBRA
election and initial COBRA payment). Instead, the maximum disregarded period of
one year is applied concurrently to the timeframe for the COBRA election and
initial COBRA premium payment. However, these timeframes are subject to the transition relief provided
below.
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 the Emergency Relief (including the mandatory 30-day grace period),
but subject to the transition relief
provided below.
Notice 2021-58 Transition Relief
Because some individuals may have assumed that the
disregarded period for making the initial premium payment begins on the date of
the COBRA election, individuals who made elections more than 60 days after
receipt of the election notice may have less time than they anticipated to make
their initial premium payment. Thus, Notice 2021-58 provides that in no event will an initial COBRA premium
payment be due before Nov. 1, 2021 (even if Nov. 1, 2021 is more than one year
and 105 days after the date the election notice was received), as long as the
individual makes the initial COBRA premium payment within one year and 45 days
after the election date.
This transition relief is an exception to the general rule
that disregarded periods for COBRA elections and initial COBRA payments run
concurrently with respect to each individual.
Interaction with ARPA COBRA Premium Subsidy
The extensions under the Emergency Relief do not apply to the timeframes for
electing COBRA coverage with ARPA premium subsidies, or for providing the
required notice of the ARPA extended election period. An individual who has a
disregarded period under the Emergency Relief may elect retroactive COBRA
coverage, subject to the clarifying guidance in Notice 2021-58, and may elect
COBRA coverage with ARPA premium subsidies for any period for which the
individual is eligible for premium assistance. However, the disregarded periods
under the Emergency Relief continue to apply to payments of COBRA premiums
after the end of the ARPA premium subsidy period, to the extent that the
individual is still eligible for COBRA coverage and the Outbreak Period has not
ended.
Examples
Notice 2021-58 provides 10 comprehensive examples to
illustrate how COBRA elections and premium payments are treated under Notice
2021-58, including how to apply the ARPA premium subsidies. All of the examples
assume that the group health plans have calendar month coverage periods, with
premium payments due by the first of the month, and that the plans provide that
qualified beneficiaries must make COBRA premium payments within the statutory
30-day grace period.
