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IRS Issues Updated Guidance on COBRA Emergency Relief & COBRA Premium Payments

COBRA subsidies under the American Rescue Plan Act (ARPA) ended on September 30, 2021, but participants may still be eligible for COBRA related “emergency relief” which includes extended timeframes for electing COBRA and making premium payments.

Recall that on March 1, 2020, “emergency relief” was established as a result of the “National Emergency” to help plans, participants and third-party service providers impacted by the COVID-19 pandemic by postponing various employee benefit plan deadlines during a defined “Outbreak Period”, and this period may still be in effect for participants.

What’s the Outbreak Period?

The “Outbreak Period” establish extended timeframes for plan administrators, participants and beneficiaries to comply with the various components of COBRA administration, including notification, election and premium payment requirements. The “Outbreak Period” initially began on March 1, 2020, and it was to last until 60 days after the announced end of the “National Emergency”, but under federal law, the period of relief cannot exceed one year. Because the “National Emergency” has yet to be declared over, the one-year extension became applicable, placing the deadline for relief to expire on February 28, 2021. With the pandemic still ongoing as of February 28, and relief still being necessary, the U.S. Department of Labor (DOL) had to determine how to work around the law related to the one-year period for relief.

What’s the Impact of the February 26 Guidance on the Outbreak Period?

In anticipation of the impending “emergency relief” expiration date, on February 26, 2021, the DOL’s Employee Benefits Security Administration (EBSA) issued Disaster Relief Notice 2021-01 to provide guidance on the duration of COVID-19-related relief for certain employee benefit plan deadlines during the “Outbreak Period”. The guidance was provided to resolve the issue with the expiration of the one-year period. In the guidance, the DOL affirmed its interpretation of the Employee Retirement Income Security Act (ERISA) limitation that the notice periods can be disregarded until the earlier of:

  • One year from the date the participant was first eligible for the relief; or
  • 60 days after the announced end of the “National Emergency”.

The guidance further stated, “on the applicable date, the timeframes for individuals and plans with periods that were previously disregarded under the Notices will resume. In no case will a disregarded period exceed one year.”

This phrasing suggested that plan sponsors must apply relief on a participant-by-participant basis, and the guidance provided some examples of how this would work:

  • “If a qualified beneficiary would have been required to make a COBRA election by March 1, 2020, the Notice delays that requirement until February 28, 2021, which is the earlier of one year from March 1, 2020, or the end of the Outbreak Period (which remains ongoing).
  • If a qualified beneficiary would have been required to make a COBRA election by March 1, 2021, the Joint Notice delays that election requirement until the earlier of one year from that date (i.e., March 1, 2022) or the end of the Outbreak Period.”

Based on the offered examples, there may be participants and/or beneficiaries who are still eligible for COBRA relief as determined by their initial COBRA eligibility date.

What Are the Extended Deadlines Established by the Outbreak Period?

The COBRA deadlines that have been extended until after the “Outbreak Period” ends include:

  • The 30 or 60-day deadline for employers or individuals to notify the plan of a qualifying event;
  • The 60-day deadline for individuals to notify the plan of a determination of disability;
  • The 60-day deadline for participants to elect COBRA; and
  • The 45-day deadline to make a first premium payment and 30-day deadline for subsequent premium payments.

In addition, the “Outbreak Period” is disregarded when determining the date an employer must send a COBRA election notice to individuals whose coverage is ending, which provides some relief to those employers whose operations may still be shut down. A separate Disaster Relief Notice included deadline extensions for notices and disclosures required under ERISA which provided relief for plan sponsors on certain notice requirements. This DOL guidance provides that plan sponsor relief also expires after a one-year period from the date of the relief.

When Are Premium Payments Due?

The disregard periods to elect COBRA coverage and make initial and subsequent COBRA premium payments generally run concurrently, and to affirm this interpretation, on October 6, 2021, the IRS issued Notice 2021-58 (Notice). The Notice provides clarification on how the deadline extensions for electing COBRA coverage and paying COBRA premiums work.

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”. Meaning that participants who delay electing COBRA cannot have more than one year of total disregard time for the COBRA election and initial COBRA premium payment.

The Notice 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.”

After the initial COBRA premium payment, subsequent payments are due one year from the date the payment would have originally been due, including a 30-day mandatory grace period.

The Notice also included an exception to the general rule of COBRA elections and initial COBRA premium payments running concurrently. The exception provided “transition relief” for COBRA premium payments which were due before November 1, 2021. The “transition relief” provided that an individual would not be required to make the initial COBRA premium payment prior to November 1, 2021, even if that date was more than one year and 105 days after the date the COBRA election notice was received, provided the individual makes the initial COBRA premium payment within one year and 45 days after the date of the COBRA election.

The “transition relief” is intended to avoid inequitable outcomes as because some participants may have assumed that the disregarded period for making the initial COBRA premium payment began on the date of the COBRA election, and participants who made COBRA elections more than 60 days after receipt of the COBRA election notice may have less time than they anticipated to make their initial COBRA payment.

What Else Is Included In Notice 2021-58?

The Notice provides other illustrations related to the timeframe for electing COBRA under the “Outbreak Period” and failure to make premium payments under the “Outbreak Period” rules.

The guidance also addresses the interaction of the “emergency relief” with the COBRA subsidies that were made available for certain eligible individuals under ARPA and clarifies that the timeframe extensions do not apply to providing the notice of the ARPA extended election period or for electing COBRA coverage with premium assistance under ARPA.

Next Steps for Employers

Employers are encouraged to review this guidance as it provides several detailed examples of how the COBRA deadline extensions apply. Plan disclosures issued prior to or during the pandemic may need to be reissued or amended if those disclosures failed to provide accurate information regarding the time in which participants and beneficiaries were required to act, such as COBRA election notices and premium payment notices.

Employers should continue to work closely with their third-party COBRA administrators to ensure compliance with the federal guidance.

How HR Works Can Help

HR Works’ Benefits Administration Service helps employers with the administrative burden of COBRA. If you are not currently an HR Works Benefits Administration client and need our compliance expertise and support, please contact info@hrworks-inc.com, go to the “Contact Us” section of our website or call 1-877-219-9062. We will connect you with a representative who can provide additional information about our services.

HR Works, Inc., headquartered at 200 WillowBrook Office Park in Fairport (Rochester), New York, with an office in East Syracuse, is a human resource management outsourcing and consulting firm serving clients throughout the United States. HR Works provides scalable strategic human resource management and consulting services, including: affirmative action programs; benefits administration outsourcing; HRIS self-service technology; full-time, part-time and interim on-site HR managers; HR audits; legally reviewed employee handbooks and supervisor manuals; talent management and recruiting services; and training of managers and HR professionals.