DOL Clarifies Application of COVID-19 Extensions of Time to COBRA Premium Payments

Insights | DOL Clarifies Application of COVID-19 Extensions of Time to COBRA Premium Payments

Author: Shelly Hodges-Konys, Director of Compliance

Previous guidance issued by the Departments regarding Extensions of Certain Timeframes for Employee Benefit Plans, Participants and Beneficiaries (“Emergency Relief”) due to the COVID-19 pandemic left employers, COBRA administrators and benefits consultants with questions regarding the application of these extensions to COBRA premium payment deadlines. The significant outstanding question was: Did 12 months of relief apply to the extension of time to make an election and provide another 12 months to make a payment? Thankfully, the Departments issued Notice 2021-58 clarifying that the timeframes are intended to run concurrently.

COBRA’s standard deadlines give participants:

  • 60 days from the date of receipt of a COBRA election notice to elect continued coverage; and
  • 45 days from the election to make a payment. 

The Emergency Relief extends the deadlines until the earlier of:

  • One year from the date an individual is first eligible for relief; or
  • 60 days after the end of the COVID-19 national emergency.

The guidance provides the following clarification:

  • Individuals that elect COBRA within 60 days (per the standard deadline) have one year and 45 days to make an initial payment.
  • Individuals that elect COBRA after the 60 days have one year and 105 days (representing the standard 60-day election period and 45-day initial payment period) after the COBRA election notice is provided to make an initial payment.
  • The guidance further clarifies that due to potential confusion regarding the application of the Emergency Relief to COBRA payments, in no event will an individual be required to make the initial premium payment prior to November 1, 2021, if that individual makes an initial premium payment within one year and 45 days after the date of their COBRA election.

Subsequent COBRA premium payments must be made within one year and 30 days from the date the premium payment would have been due originally.    

As a reminder, the extensions of time under Emergency Relief provisions do not apply to COBRA elections for subsidy under the American Rescue Plan Act but do apply to continued coverage periods after September 30, 2021, the subsidy end date.

The guidance provides specific examples to help illustrate the intent of the relief and how it applies.

Employer Action

Employers should review the guidance to understand the relief and how it applies to individuals electing COBRA during the continued COVID-19 national emergency.

  • Employers that engage a COBRA administrator should reach out to their vendor to confirm compliance with this most recent guidance.
  • Employers that administer their own COBRA should review the guidance and confirm their understanding with legal counsel to ensure proper administration of the Emergency Relief provisions.

While the guidance does not address specific participant notice obligations, prudent employers may also want to proactively discuss any recommended notice changes with counsel as well. COBRA provides that notices given to participants must reasonably reflect a participant’s rights and how continuation may be elected.  Any information that misleads a COBRA participant may be seen as a violation of COBRA’s notice requirement and a failure of an employer’s fiduciary responsibility under ERISA.     

For questions or additional information, please contact your HORAN representative at 800.544.8306.

The information contained in this document is informational only and is not intended as, nor should it be construed as, legal or accounting advice. Neither HORAN nor its consultants provide legal, tax nor accounting advice of any kind. We make no legal representation, nor do we take legal responsibility of any kind regarding regulatory compliance. Please consult your counsel for a definitive interpretation of current statute and regulation and their impact on you and your organization.