IRS Clarifies Application of Deadline Extensions to COBRA
The Internal Revenue Service (IRS) recently issued some much-needed guidance surrounding the application of deadline extensions that the IRS and the U.S. Department of Labor (DOL) previously issued for initial elections under the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) and initial and subsequent premium payments.
On May 4, 2020, the IRS and DOL announced relief which provided that, for a period beginning on March 1, 2020, certain Employee Retirement Income Security Act of 1974 (ERISA) plan deadlines would be paused for up to one year, including deadlines related to COBRA, special enrollment under the Health Insurance Portability and Accountability Act of 1996 (HIPAA), and claims and appeals.
In early 2021, the IRS and DOL clarified that the applicable deadlines generally would be paused until the earlier of: (1) 12 months from the date that the deadline otherwise would have started to run, or (2) 60 days after the date the COVID-19 national emergency is declared ended (referred to as the “Outbreak Period”).
This most recent guidance clarifies how the deadline extensions apply to COBRA elections and premium payments. In Notice 2021-58, the IRS states that the deadline extensions for COBRA elections and premium payments run concurrently, so that only a maximum of one year will be disregarded for both the initial election and first payment deadlines. Specifically:
“If an individual elected COBRA continuation coverage outside of the initial 60-day COBRA election [period], that individual generally will have one year and 105 days after the date the COBRA notice was provided to make the initial COBRA premium payment.”
“If an individual elected COBRA continuation coverage within the initial 60-day COBRA election [period], that individual will have one year and 45 days after the date of the COBRA election to make the initial COBRA premium payment.”
The notice states that “[i]ndividuals must make the initial COBRA election by the earlier of (1) one year and 60 days after the individual’s receipt of the COBRA election notice, or (2) the end of the Outbreak Period.” For each subsequent COBRA premium payment deadline, individuals will have a maximum of one year and 30 days from the original payment due date.
The notice also provides transition relief for plans and participants who assumed that the initial payment deadline suspension ran from the date of the COBRA election rather than concurrently with the election deadline suspension. Individuals may make initial payments by November 1, 2021, even if that date is more than one year and 105 days from the date the individual was first eligible for COBRA. In all cases, individuals must make initial premium payments within one year and 45 days of the date of the COBRA election to continue the coverage.
Also included in Notice 2021-58 are numerous examples showing how the COBRA deadline extensions apply.