IRS Provides Further Guidance on COBRA Election and Payment Deadlines

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In Notice 2021-58 (the Notice), the Internal Revenue Service (IRS) clarified that the one-year tolling relief periods for Consolidated Omnibus Budget Reconciliation Act (COBRA) elections and initial premium payments run concurrently, not consecutively. This means that a qualified beneficiary generally will have only one year of total disregarded time for the election and initial payment periods.

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As McDermott previously discussed, COBRA election and payment deadlines were tolled for up to one year as a result of COVID-19 relief. Employers wondered whether, under this tolling relief, a qualified beneficiary could wait one year to elect COBRA, and then wait another year to make her initial premium payment (assuming the COVID-19 “outbreak period” had not ended sooner). The IRS has now opined that the answer is no. The IRS illustrated this point as follows:

  • If a qualified beneficiary elected COBRA coverage outside of the normal 60-day COBRA election period (i.e., the qualified beneficiary took advantage of the tolling relief when electing COBRA coverage), the tolled period for making the initial premium payment begins on the date the COBRA notice was provided, and the payment deadline is one year and 105 days later (i.e., the 60-day election period plus the usual 45-day period in which to make the initial payment).
  • If the qualified beneficiary elected COBRA within the normal 60-day COBRA election period (i.e., the qualified beneficiary did not take advantage of the tolling relief when electing COBRA coverage), the tolled period for making the initial premium payment begins on the date of the COBRA election, and the payment deadline is one year and 45 days later (i.e., to account for the usual 45-day period in which to make the initial payment).

The IRS included an exception to the above rules in the form of “transition relief.” Under the transition rule, a plan may not require a qualified beneficiary to make an initial COBRA premium payment before November 1, 2021, as long as the payment is made within one year and 45 days of the individual’s COBRA election. This is the IRS’s way of protecting individuals who may have thought they had a longer period in which to make their first COBRA payment (i.e., a new one-year tolling period applicable to their initial payment after delaying their COBRA election via the tolling relief).

With regard to payment deadlines for periods not covered by the initial COBRA premium payment (i.e., generally, premiums due each subsequent month), the Notice indicates that the payments are due one year from the date that the payment originally would have been due, taking into account the normal 30-day grace period.

The Notice also reiterates the earlier guidance stating that the tolling relief does not apply to elections of the American Rescue Plan Act’s no-cost COBRA coverage.

For more information on how to apply COBRA election and payment guidance to your group health plan, please contact your regular McDermott employee benefits lawyer or one of the authors.