Notice Clarifies COBRA Coverage Deadlines

On October 7th, 2021, the Internal Revenue Service (IRS) issued guidance relating to COBRA continuation coverage deadlines. Also written by the Department of Treasury, Notice 2021-58 clarifies current COBRA coverage deadlines in connection with the COVID-19 pandemic. In addition, the U.S. Departments of Labor and Health and Human Services will also follow the new guidance. Previously, in May 2021, the IRS issued COBRA continuation health coverage guidance relating to employer tax breaks.

Summary of the Consolidated Omnibus Budget Reconciliation Act of 1986 (COBRA)

In general, COBRA allows employees (and their families to continue their same group health coverage after a qualifying life event. Moreover, the events would result in the loss of health coverage. Specifically, these events include:

• termination or reduction in hours,
• death of a covered employee,
• divorce or legal separation,
• Medicare entitlement,
• and loss of dependent status.

On this occasion, a participant has up to 60 days after receiving a COBRA notice to elect COBRA coverage. Additionally, the individual has another 45 days after submitting the election to make the first COBRA premium payment. Also, group health plans are generally required to give participants a 30-day grace period for each monthly premium payment.

Updates to COBRA Continuation Coverage Deadlines

Earlier, prior IRS guidance extended the continuation coverage deadlines by one year. Subsequently, Notice 2021-58 adds clarification to the tweaked COBRA continuation coverage deadlines. Specifically, the Notice states that the one-year extension applies to each covered deadline for each participant. However, each one-year extension granted to a given participant will run concurrently. Comparatively, the total time for a participant’s COBRA election and initial payment deadlines will now not exceed one year. Also, Notice 2021-58 clarifies that the one year extension of deadlines does not apply to all related deadlines. For example, any deadlines relating to COBRA notices and elections under the American Rescue Plan Act are not affected.