The IRS has issued Notice 2021-58 that provides clarification on how to apply the COBRA extensions created under the Joint Notification of Extensions of Certain Timeframes for Employee Benefit Plans, Participants, and Beneficiaries Affected by the COVID-19 Outbreak (commonly known as the Joint Notice).
The Joint Notice required plans to disregard the period for taking certain actions related to COBRA until 60 days after the end of the COVID-19 Outbreak Period, subject to a maximum disregarded period of one year.
The Joint Notice applies to the:
- 60-day election period for COBRA continuation coverage.
- dates for making COBRA premium payments.
- date for individuals to notify the plan of a qualifying event or determination of disability.
- date for a plan to provide a COBRA election notice.
The disregarded period applies on an individual basis beginning on the date the individual or plan was first eligible for relief under the Joint Notice.
Notice 2021-58 clarifies that the disregarded period for an individual to elect COBRA continuation coverage and the disregarded period for the individual to make initial and subsequent COBRA premium payments generally run concurrently.
The Notice gives the following example:
Individuals 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.
- If an individual elected COBRA continuation coverage outside of the initial 60-day COBRA election timeframe after notice was provided, 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. The 105-day period is the sum of the 60 days to make an initial COBRA election and the 45 days to make the initial COBRA premium payment.
- If an individual elected COBRA continuation coverage within the initial 60-day COBRA election timeframe after notice was provided, that individual will have one year and 45 days after the date of the COBRA election to make the initial COBRA premium payment.
The IRS notes that in the absence of its clarification that the disregarded periods run concurrently, some individuals may have assumed that they ran independently. As a result, those individuals who made elections more than 60 days after receipt of the election notice may have less time than they anticipated to make the initial premium payment. Therefore, to avoid inequitable outcomes, in no event will an individual be required to make the initial premium payment before November 1, 2021, even if November 1, 2021, is more than one year and 105 days after the date the election notice was received, provided that the individual makes the initial premium payment within one year and 45 days after the date of the election.
The Notice reiterates the fact that extensions provided in the Joint Notice do not affect the periods for providing notice related to the premium assistance (i.e., subsidy) available under the American Rescue Plan Act (ARPA).
The Notice provides several helpful illustrations related to the operation of the disregarded periods and their interaction with ARPA.