By: HUB’s EB Compliance Team
Recently, in Notice 2021-58, the IRS, U.S. Department of Labor (“DOL”), and Department of Health and Human Services (the “Agencies”) clarified how the Outbreak Period rules interact with the timing of COBRA election and payment deadlines. The guidance confirms that COBRA qualified beneficiaries only get one extra year to both make the initial election and pay; not an extra year for each. However, it provides a transition period until November 1 for COBRA qualified beneficiaries to bring themselves current.
HUB has detailed the Outbreak Period guidance in prior articles. The short summary is that, in response to the COVID-19 pandemic, the Agencies provided additional time for employees and COBRA qualified beneficiaries to take certain actions. The guidance essentially gives these individuals a year (or until 60 days after the end of the Presidentially-declared national emergency due to the COVID-19 pandemic) plus the original deadline (e.g., 30 days, 45 days, or 60 days) to take the applicable action. As HUB has previously noted, the most recent guidance states that each event has its own separate delay.
Because each event has its own separate delay, this raised a question in some peoples’ minds about the timing of the COBRA election and payment periods. Under the general COBRA rules (without the Outbreak Period relief), a qualified beneficiary has 60 days after the COBRA notice is provided to elect COBRA and then an additional 45 days to make the first payment. This means the election and payment are separate events.
COBRA’s Long Tail?
Well, if each event gets its own Outbreak Period, does that mean the qualified beneficiary gets a year plus 60 days to elect and then an additional year plus 45 days to make the first payment? Applied that way, someone who was furnished a COBRA notice on November 1, 2020 would have until December 30, 2021 to elect COBRA and until February 13, 2023 to make the first payment.
Scaled Back Relief
Fortunately, the Agencies said no. Instead, the Agencies said that instead the relief works like this:
- If the qualified beneficiary does not make the election within 60 days of when the notice is furnished, then s/he has one year plus 105 days to both elect and make the initial payment. (As is perhaps obvious, 105 is 60 + 45).
- On the other hand, if the qualified beneficiary makes the election in the first 60 days, then s/he would have one year plus 45 days to make the initial payment.
Put another way, the one-year delays for the 60-day election period and the 45-day initial premium payment period run concurrently so that there is no more than a one-year delay for election and premium payment. The Notice is a little unclear on this point, but given prior guidance, it seems this one-year delay could be shortened if the President declares the national emergency to be over. As of the date of this writing, that has not happened.
Relief from the Relief
Some individuals may have incorrectly assumed they were entitled to a year for each event. Recognizing this, the Notice says that the individuals cannot be required to make their first premium payment before November 1, 2021. This means individuals who were sent COBRA notices before July 19, 2020 and who are entitled to Outbreak Period relief have some extra time to make their first premium payments if they have not already done so. The Notice also confirms (again) that these extensions do not apply to the COBRA subsidy elections.
Uncoiling Some Confusion
The Notice provides several helpful examples to help describe how this works. One confusing part of the guidance (particularly in the examples) is that it repeatedly refers to the date the COBRA qualified beneficiary receives the election notice as triggering the beginning of the 60-day election period. However, existing COBRA regulations or other guidance says the 60-day election period begins with the notice is “sent”, “provided”, or “furnished” (all terms that are essentially equivalent). The DOL has even acknowledged, albeit indirectly, that the date of mailing or furnishing (assuming an appropriate delivery method was used and documented) is the date that begins the 60-day period. This appears to be an oversight on the part of the Agencies, but additional clarification would be appreciated.
Employers should consider checking with their COBRA administrators to make sure they are aware of this guidance and complying with it. Additionally, to the extent there are COBRA qualified beneficiaries who have elected COBRA, but not made the initial payment even though it has been more than a year and 105 days since they were initially eligible for COBRA (or a year and 45 days since they elected), a reminder may be in order. They may believe they have additional time and instead need to send in their payment by November 1.
If you have any questions, please contact your HUB Advisor. View more compliance articles in our Compliance Directory.
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Neither Hub International Limited nor any of its affiliated companies is a law or accounting firm, and therefore they cannot provide legal or tax advice. The information herein is provided for general information only, and is not intended to constitute legal or tax advice as to an organization’s or individual's specific circumstances. It is based on Hub International's understanding of the law as it exists on the date of this publication. Subsequent developments may result in this information becoming outdated or incorrect and Hub International does not have an obligation to update this information. You should consult an attorney, accountant, or other legal or tax professional regarding the application of the general information provided here to your organization’s specific situation in light of your or your organization’s particular needs.