Final Touches: IRS Clarifies Impact of COVID-19 Disaster Relief on COBRA Payment Deadlines

Matthew P. Chiarello • October 22, 2021

The Internal Revenue Service recently issued guidance to clarify the interaction between COVID-19 disaster relief and premiums due for continuation coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”).

As summarized here , the Joint Notice and the EBSA Disaster Relief Notice (the “Disaster Relief”) extended certain key deadlines in light of the COVID-19 pandemic.  In general, the Disaster Relief delayed otherwise applicable deadlines until the earlier of (1) one year from the date the individual or plan was first eligible for relief or (2) 60 days after the announced end of the National Emergency.  As we previously identified here , it was unclear how this extension would apply to the payment of COBRA premiums.

Notice 2021-58 (the “Notice”) clarifies that the extension for electing COBRA coverage and the extension for making initial and subsequent COBRA premium payments run concurrently.  The Notice provides limited transition relief in the case of premium payments due before November 1, 2021.  The following examples summarized from the Notice are instructive:

Example A: Murphy participates in Employer’s group health plan. On August 1, 2020, Murphy has a qualifying event and receives a COBRA election notice. Murphy elects COBRA continuation coverage on February 1, 2021, retroactive to August 1, 2020.  Murphy has until November 14, 2021 to make the initial COBRA premium payment (one year and 105 days after August 1, 2020), because he did not elect COBRA continuation coverage under the Disaster Relief within 60 days after receipt of the election notice. The initial COBRA premium payment would include monthly premium payments for August 2020 through October 2020. The November 2020 monthly COBRA premium payment would be due by December 1, 2021 (one year and 30 days after November 1, 2020), with premium payments due every month after that for the months that Murphy is eligible for COBRA continuation coverage.

Example B: Erica participates in Employer’s group health plan. Erica has a qualifying event and receives a COBRA election notice on October 1, 2020. Erica elects COBRA continuation coverage on October 15, 2020 retroactive to October 1, 2020. Erica has until November 29, 2021, to make the initial COBRA premium payment (one year and 45 days after October 15, 2020) because she elected COBRA within 60 days of receiving the election notice. The initial COBRA premium payment would include only the monthly premium payment for October 2020. The November 2020 monthly COBRA premium payment would be due by December 1, 2021 (one year and 30 days after November 1, 2020), with premium payments due every month after that for the months Erica is eligible for COBRA continuation coverage.

Example C:  Judy participates in Employer’s group health plan. Judy has a qualifying event and is provided a COBRA election notice on August 1, 2020.  Judy has until September 30, 2021 (one year and 60 days after August 1, 2020) to elect COBRA continuation coverage. If Judy elects COBRA continuation coverage after September 30, 2020 (but on or before September 30, 2021) she has until November 14, 2021 to make the initial COBRA premium payment (one year and 105 days after receipt of the election notice). If Judy makes the initial COBRA premium payment on November 14, 2021, that premium payment would include the monthly premiums for August 2020 through October 2020. The November 2020 monthly COBRA premium payment would be due by December 1, 2021 (one year and 30 days after November 1, 2020), with premium payments due every month after that for the months Judy is eligible for COBRA continuation coverage.

Example D: The facts are the same as in Example A, except that Murphy has a qualifying event on April 1, 2020. Murphy receives the COBRA election notice on April 1, 2020 and elects COBRA continuation coverage on October 1, 2020, retroactive to April 1, 2020. As of July 15, 2021, Murphy has not made the initial premium payment. Under the transition relief provided in the Notice, Murphy has until November 1, 2021 to make the initial premium payment, even though November 1, 2021 is more than one year and 105 days after April 1, 2020. Although the disregarded periods for the COBRA election and the initial premium payment run concurrently, under the transition relief provided in the Notice, an individual will not be required to make the initial premium payment before November 1, 2021, as long as the individual makes the initial premium payment within one year and 45 days after the date of election. November 1, 2021 is less than one year and 45 days after October 1, 2020. Therefore, Murphy remains eligible to make the initial premium payment by November 1, 2021. The initial COBRA premium payment would include the monthly premium payments for April 2020 through October 2020. The November 2020 COBRA premium payment would be due by December 1, 2021 (one year and 30 days after November 1, 2020), with premium payments due every month after that for the months Murphy is eligible for COBRA continuation coverage.

The Notice provides several additional examples that plan sponsors and administrators may wish to review.  Given this latest clarification, it may be worthwhile to ensure compliance with the Disaster Relief and the requirements of COBRA. A copy of the Notice is available for review here.

Employee burnout: what it is and how to prevent it

By Mardy Gould • May 24, 2024
Employee burnout has become an epidemic in today’s modern workplace. So much so that the World Health Organization (WHO) officially recognizes it as an “occupational phenomenon.”1 While many used to consider mounting workplace stress an individual employee problem, these days, it’s become an employer’s responsibility to prevent burnout before it hurts productivity and business performance—not to mention your employees’ physical and mental health. Luckily, you can prevent burnout from affecting your workforce in several ways. This article will explore the causes and signs of employee burnout and the steps you can take to create a positive work environment where employees feel safe from toxic stress levels.

Form 720 and PCORI fee FAQs

By Mardy Gould • May 23, 2024
If you're a small business owner, you may have heard of the acronym PCORI and the fees that come with it. But what is PCORI, and how does it apply to your organization? Under the Affordable Care Act (ACA), sponsors of self-insured health plans must pay a fee to fund the federal Patient-Centered Outcomes Research Institute (PCORI). PCORI is an independent organization the ACA created to conduct research to help healthcare consumers make better decisions for their specific needs and outcomes. It also performs research related to clinical effectiveness. Employers offering a self-insured medical reimbursement health plan, such as a health reimbursement arrangement (HRA), must pay this fee by July 31 each year via Form 7201. This fee was initially set to expire in 2019, but Congress extended it through September 30, 20292, due to the Further Consolidated Appropriations Act of 20203.
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