On October 6, 2021, the IRS released guidance that clarified the application of the special COVID-19 deadline extensions for electing and paying for COBRA continuation coverage. In addition, the guidance outlined how the COBRA deadline extensions interacted with the American Rescue Plan Act (ARPA) COBRA subsidies. The IRS outlined the following:

  • The COVID-19 deadline extensions to elect COBRA coverage and pay COBRA premiums generally run concurrently;
  • Individuals will not be required to make an initial COBRA premium payment prior to November 1, 2021, as long as they make the payment within 1 year and 45 days after the date of their election; and
  • The COVID-19 deadline extensions do not apply to the ARPA employer deadline to provide the Notice of Special Election Period or the individual deadline to elect COBRA coverage during the special 60-day election window.

Background

In May 2020, in response to the COVID-19 National Emergency, the Departments of Labor, Health and Human Services (HHS), and the Treasury (collectively referred to as the Departments) published a Joint Notice, which required group health plans to extend certain deadlines (“COVID-19 deadline extensions”). When calculating certain deadlines, the Joint Notice required plans to “disregard” the “Outbreak Period,” which began on March 1, 2020 and ends 60 days after the announced end of the National Emergency (which was extended by President Biden on February 24, 2021 until March 1, 2022, absent an additional extension) or such other date announced by the Departments in a future notice. In February 2021, the Departments clarified that the COVID-19 deadline extensions are based on each individual’s or plan’s unique timeline and that deadlines can be paused up to 1 year.

In other words, individuals’/plans’ deadlines were extended until the earlier of (1) 1 year from the date an individual or plan was first eligible for relief (i.e., individuals’/plans’ new deadline is up to 1 year from their original deadline), or (2) 60 days after the announced end of the National Emergency (the end of the Outbreak Period).

With respect to COBRA continuation coverage, the Joint Notice provided the following deadline extensions:

  • The 60-day election period for COBRA continuation coverage;
  • The 45-day time period for making the initial COBRA premium payment;
  • The 30-day grace period for making subsequent COBRA premium payments (or a longer grace period prescribed under the plan);
  • The date individuals must notify group health plans of a qualifying event or determination of disability; and
  • The date group health plans are required to provide the COBRA election notice.

In addition, in March of 2021, the ARPA was enacted, which provided a 100% COBRA subsidy to “Assistance Eligible Individuals” (AEIs) from April 1, 2021 through September 30, 2021 (“COBRA subsidy period”). Among other items, ARPA provided a special 60-day election window for individuals who were not covered under COBRA as of April 1, 2021, but who would have been eligible for subsidies if they elected or did not terminate COBRA coverage. These individuals were given 60 days from the day they received the Notice of Special Election Period, which employers were required to provide by May 31, 2021, to elect coverage. For more on the ARPA COBRA subsidies, see our prior blog.

Clarification of the COBRA COVID-19 Deadline Extensions

The new IRS Notice clarifies that the deadline extensions for electing COBRA and making COBRA premium payments generally run concurrently (as outlined in the chart below). In other words, individuals do not get up to a 1-year extension to elect COBRA coverage and an additional 1-year extension to make the initial COBRA premium payment. Rather, individuals may only receive up to a 1-year extension in total for both the election and premium payment.

The IRS acknowledges that some individuals may have erroneously assumed that the deadline extension for making the initial premium payment begins on the date of the COBRA election (and not the date the individual receives the COBRA election notice as prescribed by the IRS guidance), which may result in some individuals having less time to make their initial COBRA payment than anticipated. To avoid inequitable outcomes for these individuals, the IRS provides that an individual will not be required to make the initial COBRA premium payment before November 1, 2021, even if that date is more than 1 year and 105 days after an individual received their COBRA election notice, provided that the individual makes the initial premium payment within 1 year and 45 days after the date of their election.

The application of the COVID-19 deadline extensions to COBRA timelines are outlined below:

Usual DeadlinesSpecial COVID-19 Deadline Extension
Deadline to Initially Elect COBRA CoverageIndividuals have 60 days after receiving the COBRA election notice to elect COBRA continuation coverage.Election must be made by the earlier of:
(1) 1 year and 60 days after the individual’s receipt of the COBRA election notice; or
(2) The end of the Outbreak Period.
Usual DeadlinesSpecial COVID-19 Deadline Extension
Deadline to Pay Initial COBRA Premium PaymentIndividuals have at least 45 days after electing COBRA coverage to make the initial COBRA premium payment.• If individual elected COBRA within the initial 60-day COBRA election deadline, the individual will have 1 year and 45 days after the COBRA election to make the initial COBRA premium payment.
• If individual elected COBRA outside of the initial 60-day COBRA election deadline, the individual will have 1 year and 105 days (60 days to make the initial COBRA election plus 45 days to make the initial COBRA premium payment) after the day the COBRA notice was received to make the initial COBRA premium payment.
Usual DeadlinesSpecial COVID-19 Deadline Extension
Deadline to Pay COBRA Premium PaymentsIndividuals have at least 30 days after the due date to make subsequent COBRA premium payments before coverage can be dropped (a plan may prescribe a longer grace period).• Individuals have up to 1 year and 30 days from the original payment due date to make subsequent premium payments (subject to the November 1, 2021 transition relief).

The IRS provides some examples to illustrate these COVID-19 deadline extensions:

Example: On August 1, 2020, Individual A has a qualifying event and receives a COBRA election notice. When must Individual A elect COBRA continuation coverage, make their initial premium payment, and subsequent premium payments?

  • Deadline to Elect COBRA: Individual A’s deadline to elect coverage is up to 1 year and 60 days after receiving the COBRA election notice, which is August 31, 2021.
  • Deadline for Initial Payment: Individual A has up to 1 year and 105 days after receiving the COBRA election notice to make the initial payment, which is November 14, 2021. If Individual A makes the premium payment on November 14, 2021, they must include premium payments for August 2020 through October 2020 (this is because premium payments must be made for the months that have exceeded the 1-year extension maximum).
  • Deadline for Subsequent Payments: Individual A would have up to 1 year and 30 days from the original due date to make subsequent premium payments. Assuming premium payments are due the first of the month, the November 2020 monthly COBRA premium payment would be due 1 year and 30 days after November 1, 2020, which is December 1, 2021, with premium payments due every month after that.

Example 2: On April 1, 2020, Individual B receives the COBRA election notice and elects coverage on October 1, 2020, retroactive to April 1, 2020. As of July 15, 2021, Individual B has not made the initial premium payment. When must Individual A make the initial premium payment for COBRA coverage?

  • Deadline for Initial Payment: Generally, Individual B has up to 1 year and 105 days after receiving the COBRA election notice to make the initial payment, which is July 6, 2021. However, under the IRS transition relief, an individual will not be required to make the initial premium payment before November 1, 2021, as long as the individual makes the premium payment within 1 year and 45 days after electing COBRA. Since November 1, 2021 is less than 1 year and 45 days after October 1, 2020, Individual B will have until November 1, 2021 to make their initial payment. The initial payment would include premium payments for April 2020 through October 2020. The November 2020 premium payment would be due by December 1, 2021 (1 year and 30 days after the November 1, 2020 payment due date).

COBRA Deadline Extensions and ARPA COBRA Subsidies

The IRS guidance clarifies that the COVID-19 COBRA deadline extensions interact with the ARPA COBRA subsidies:

  • The COVID-19 COBRA deadline extensions do not apply to the ARPA deadlines for providing the Notice of Special Election Period and the special 60-day election window, which means that employers must have provided the Notice of Special Election Period by May 31, 2021 and individuals had up to 60 days from the date they received this notice to take advantage of the special enrollment;
  • Individuals can elect retroactive COBRA continuation coverage and receive ARPA COBRA premium subsidies for any period in which they are eligible for the subsidy;
  • The COVID-19 COBRA deadline extensions apply to COBRA premium payments due after the COBRA premium subsidy period (post September 30, 2021) to the extent an individual remains eligible for COBRA coverage and the Outbreak Period has not ended.

The IRS provides some examples to illustrate the interaction between the COVID-19 deadline extensions and the ARPA subsidies:

Example 3: On March 1, 2021, Individual C experiences an involuntary termination (and therefore is a potential AEI) and receives a COBRA election notice that day. On March 31, 2021, Individual C receives the Notice of Special Election Period and elects COBRA coverage with a ARPA subsidy beginning April 1, 2021 but does not elect retroactive coverage to March 1, 2021. Must Individual C be permitted to elect retroactive COBRA coverage on or after August 1, 2021 retroactive to March 1, 2021?

  • No, since Individual C elected ARPA continuation coverage, Individual C remained eligible to elect COBRA coverage retroactive to March 1, 2021 only until July 30, 2021 (60 days after the receipt of the Notice of Special Election Period).
  • If Individual C did not elect ARPA continuation coverage, Individual C would remain eligible to elect COBRA coverage retroactive to March 1, 2021 until April 30, 2022 (one year and 60 days after March 1, 2021).

Example 4: On November 1, 2020, Individual D experiences an involuntary termination (and therefore is a potential AEI) and receives a COBRA election notice that day. On April 30, 2021, Individual D receives the Notice of Special Election Period. On May 31, 2021, Individual D elects COBRA coverage retroactive to November 1, 2020, with a ARPA subsidy beginning April 1, 2021. When are the deadlines for D to make the initial and subsequent monthly premium payments?

  • Deadline for Initial Payment: Individual D has up to 1 year and 105 days after receiving the COBRA election notice to make the initial payment, which is February 14, 2022. The initial premium payment must 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 every first of the month, except that no payments would be due for the COBRA subsidy period (April 1, 2021 through September 30, 2021).

Employer Takeaways

The IRS guidance provides clarification relating to the special COVID-19 rules on electing and paying for COBRA coverage. Employers should work with their COBRA vendor/administrator to ensure the new IRS guidance is implemented and applied accordingly.

Additional Resources

IRS Guidance

Sequoia Foreword:

Disclaimer: This content is intended for informational purposes only and should not be construed as legal, medical or tax advice. It provides general information and is not intended to encompass all compliance and legal obligations that may be applicable. This information and any questions as to your specific circumstances should be reviewed with your respective legal counsel and/or tax advisor as we do not provide legal or tax advice. Please note that this information may be subject to change based on legislative changes. © 2021 Sequoia Benefits & Insurance Services, LLC. All Rights Reserved

Emerald Law — Emerald is a Senior Compliance Consultant for Sequoia, where she works with our clients to optimize and streamline benefits compliance. In her free time, Emerald enjoys stand-up comedy, live music, and writing non-fiction.