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:
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:
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.
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 Deadlines | Special COVID-19 Deadline Extension | |
| Deadline to Initially Elect COBRA Coverage | Individuals 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 Deadlines | Special COVID-19 Deadline Extension | |
| Deadline to Pay Initial COBRA Premium Payment | Individuals 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 Deadlines | Special COVID-19 Deadline Extension | |
| Deadline to Pay COBRA Premium Payments | Individuals 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?
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?
The IRS guidance clarifies that the COVID-19 COBRA deadline extensions interact with the ARPA COBRA subsidies:
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?
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?
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.
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.
