Remember the DOL/Treasury relief that tolled the COBRA election and payment deadlines for up to one year due to the COVID-19 pandemic (referred to below as “Tolling Relief”)? If you have been wondering whether, under that relief, a qualified beneficiary may wait one year to elect COBRA and then wait another year to make their initial premium payment (assuming the COVID-19 “outbreak period” has not ended sooner), the IRS has finally answered your question. (The answer is “no.”)

In Notice 2021-58, the IRS (with the blessing of DOL and HHS) clarified that the one-year Tolling Relief periods for COBRA elections and initial premium payments run concurrently not consecutively.  That means that a qualified beneficiary generally will have only one year of total disregarded time for the election and initial payment periods (subject to the ambiguities noted below). 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).

However, just to keep everyone on their toes, 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 IRS 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. In addition, the Notice reminds us of the earlier guidance stating that the Tolling Relief does not apply to elections of ARPA’s no-cost COBRA coverage.

Before anyone assumes that the IRS clarification is entirely clear, it is worth pointing out a couple of ambiguities introduced in the IRS Notice.  The Notice provides that individuals have to 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.”  Why did the IRS Notice refer to the date a COBRA notice was “received” as opposed to what appears in the immediately prior paragraph in the Notice where the IRS referred to the date COBRA notices were “provided”? We do not know. It is clear that existing COBRA guidance measures periods from when notices were provided, not received.

Here’s another ambiguity.  What happens if a plan administrator delayed sending COBRA notices due to the Tolling Relief? The IRS Notice seems to suggest that each party involved in COBRA gets a separate one-year tolling period.  There is one tolling period for qualified beneficiaries and one tolling period for plan administrators.  So if the plan administrator provided the COBRA notice late, as permitted by the Tolling Relief, there could be a disregarded period of longer than one year in total for the qualified beneficiary.

The IRS Notice contains numerous examples illustrating how these rules work in real life, and is a must-read for anyone who is responsible for determining whether a COBRA election or payment is timely in these tolled times.

Photo of Paul M. Hamburger Paul M. Hamburger

Paul Hamburger is co-chair of the Employee Benefits & Executive Compensation Group and head of the Washington, DC office. Paul is also a leader of the Practice Center’s health and welfare subgroup and a member of Proskauer’s Health Care Reform Task Force.

Paul…

Paul Hamburger is co-chair of the Employee Benefits & Executive Compensation Group and head of the Washington, DC office. Paul is also a leader of the Practice Center’s health and welfare subgroup and a member of Proskauer’s Health Care Reform Task Force.

Paul provides technical knowledge and advice to employers on all aspects of their employee benefit programs, and advises employee benefit plan trustees and service providers on ERISA and employee benefit plan-related matters. He has extensive experience in negotiating service provider and outsourcing agreements. Paul frequently represents clients before government regulatory agencies, including the Internal Revenue Service, Department of Labor and Pension Benefit Guaranty Corporation.

Paul focuses on all matters affecting employee benefit plans, including:

  • 401(k) plans, ESOPs, and defined benefit plans, including cash balance pension plans
  • Executive compensation plans and agreements
  • Welfare benefit plans, including cafeteria plan, COBRA, and health care reform (PPACA) issues

Recognized by a number of publications for his exceptional work, Paul is described by The Legal 500 United States as “one of the best in his field; he inspires a high level of confidence and is a pleasure to work with.” Chambers USA notes that Paul’s clients refer to him as “a creative, business-oriented and brilliant lawyer who educates and enlightens.”

As a noted thought leader in his field, Paul frequently speaks on employee benefit matters. In addition, he served for several years as an adjunct professor at Georgetown University Law Center teaching the LL.M. tax course on ERISA Health and Welfare Benefit Plans.

An author of numerous articles on employee benefits matters, Paul has produced a number of nationally-circulated loose leaf publications, published by Thompson Information Services: Mandated Health Benefits – The COBRA Guide, The Guide to Assigning & Loaning Benefit Plan Money, and The Pension Plan Fix-It Handbook. Most recently, he was the managing author of the 6th edition of The New Health Care Reform Law – What Employers Need to Know (A Q&A Guide), published by Thompson HR.

Photo of Roberta Chevlowe Roberta Chevlowe

Roberta K. Chevlowe provides advice to employers and boards of trustees of multiemployer benefit plans on a broad range of issues relating to their retirement, health and other employee benefit plans. With nearly three decades of experience practicing in this area, Roberta employs…

Roberta K. Chevlowe provides advice to employers and boards of trustees of multiemployer benefit plans on a broad range of issues relating to their retirement, health and other employee benefit plans. With nearly three decades of experience practicing in this area, Roberta employs a practical, business minded approach to helping her clients comply with the various requirements imposed by ERISA, the Internal Revenue Code, COBRA, the Affordable Care Act and other federal and state laws affecting employee benefit programs. Roberta’s practice also includes advising clients in connection with benefit claim appeals, lawsuits and government audits; drafting plan documents, policies and employee communications materials; and negotiating with plan service providers.

Roberta is best known for her work in the area of COBRA compliance and for advising employers in connection with the benefits they provide to employees’ domestic partners and same-sex spouses. She is a co-author of The COBRA Handbook and lectures and publishes articles on a variety of employee benefits topics. In addition, Ms. Chevlowe is a member of Proskauer’s Health Care Reform Task Force, and she led the Firm’s Domestic Partner Benefits Task Force.