IRS Provides COBRA Coverage Clarifications
The IRS has issued Notice 2021-58, which clarifies the application of extension under the “Joint Notification of Extensions of Certain Timeframes for Employee Benefit Plans, Participants, and Beneficiaries Affected by the COVID-19 Outbreak” and additional guidance issued by the Department of Labor’s Emergency Relief Notices. Moreover, this notice addresses the interaction between the Emergency Relief Notices and COBRA premium assistance available under the American Rescue Plan Act (ARPA).
Notice 2021-58 clarifies that the disregarded period for an individual to elect COBRA continuation coverage runs concurrent to the disregarded period to make the premium payment. Individuals generally have 60 days to elect COBRA and an additional 45 days to pay the premium. The Notices provide that if an individual elects COBRA continuation coverage within the 60-day period, the individual will have one year and 45 days after the date of the COBRA election to make the initial COBRA premium payment. However, if the individual elects COBRA continuation coverage outside of the initial 60-day COBRA election time frame, the individual will have one year and 105 days after the date the COBRA notice was provided to make the initial COBRA premium payment. Relating to subsequent premium payments, Notice 2021-58 provides that an individual has a maximum period of one year from the date the payment originally would have been due, including any applicable 30-day grace period.
The guidance also offers transition relief to those individuals who made an election outside of the initial 60-day period and whose payment is due before November 1, 2021. Under the transition relief, the premium payment is not required to be made 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. The transition relief applies so long as the individual makes the initial payment within one year and 45 days after the date of the election.
Notice 2021-58 reiterates that the extensions under the Emergency Relief Notices do not apply to the COBRA subsidy notices required under the ARPA or to the election of COBRA continuation coverage under the ARPA. Individuals may retroactively elect COBRA continuation coverage but will not be eligible for the COBRA subsidy.
Finally, the notice offers various examples of applying the extension.