The IRS released Notice 2021-58 on October 6, 2021 clarifying the operation of extensions of the COBRA election, notification and premium payment timeframes issued as part of relief relating to the COVID-19 National Emergency. The Notice may be accessed by clicking here.
Background
The COBRA rules set timeframes for certain election, notice and payment requirements. In 2020, many of the basic COBRA election and payment timeframes were extended to take into account hardships from the COVID-19 national emergency. Plans subject to ERISA or the Internal Revenue Code became required to disregard timeframe due dates falling during the “COVID-19 Outbreak Period” which was defined as the period starting March 1, 2020 and ending 60 days after the end of the National Emergency. In 2021, the Outbreak Period was limited to a maximum disregarded period of one year (the “disregarded period”).
With this guidance, plans had to disregard the Outbreak Period when calculating the following COBRA due dates:
- The 60 day COBRA election period
- The 45 day first COBRA payment due date
- The ongoing COBRA payment premium due date (including the 30 day grace period)
- The date for individuals to notify the plan of a qualifying event or determination of disability
- The date for providing a COBRA notice
Notice 2021-58 Clarifications
Disregarded Period Runs Concurrently
Notice 2021-58 clarifies that the disregarded period for electing COBRA and paying for COBRA run concurrently. This means:
- An individual who elects COBRA outside of the initial 60-day election period will have one year plus 105 days after the COBRA notice was provided to make a first payment.
- An individual who elects COBRA within the initial 60-day election period will have one year plus 45 days after the COBRA election to make a first payment.
- Subsequent premium payments will be due one year from the date the payment would otherwise be due.
This clarification confirms that an individual electing COBRA after the initial 60-day period cannot add more than a 1-year disregarded period, except for situations covered under the New Transition Relief described below.
New Transition Relief
Since COBRA continuants were not necessarily aware that the disregarded period for electing and paying for COBRA ran concurrently, the IRS established new transition relief for a limited subset of COBRA continuants. The new transition rule provides that a first COBRA premium payment will not be due before November 1, 2021 so long as the continuant makes the first COBRA premium payment within one year and 45 days of electing COBRA coverage.
This means that if a continuant (a) elected COBRA more than 60 days after receiving a COBRA notice and (b) had a first premium payment due before November 1, 2021, the first payment due date cannot be before November 1, 2021 even if that date is more than one year plus 105 days after receiving a COBRA notice (so long as it is not more than one year plus 45 days after the date of election).
ARP Premium Assistance
Notice 2021-58 confirms that the Outbreak Period extension and new transition relief do not apply to electing COBRA with premium assistance under the American Rescue Plan Act of 2021 (which ended September 30, 2021).
Examples
The IRS provides many helpful examples illustrating the new guidance. These examples may be reviewed in the notice here.
