COBRA Is Temporarily Social Distancing from Its Election and Payment Deadlines

The IRS and DOL issued guidance on May 4, 2020 that adds a new level complexity to COBRA administration for employer-sponsored plans.  In short, the relief suspends many key participant deadlines during the so-called “Outbreak Period.”  The new rules define “Outbreak Period” to mean the period beginning March 1, 2020 and ending 60 days following the expiration of the National Emergency declaration related to COVID-19 (or at some other time in the future if the agencies decide to change the date).

Under the new guidance, the Outbreak Period is “disregarded” for purposes of calculating a participant’s deadline for electing and paying for COBRA.  As a practical matter, this means that these deadlines are suspended during the Outbreak Period.  Employees who have lost employer-sponsored health care coverage will have the usual 60 days to elect COBRA; the key difference is that this period will begin running on the day after the Outbreak Period.  For example, if the National Emergency expires on May 31, 2020, the Outbreak Period will end on July 30, 2020.  This means that employees may have until September 29, 2020 to elect COBRA, depending on when they lost coverage during the Outbreak Period.  Under these facts, an employee could have a COBRA election period of more than six months.  To further complicate matters, even if an employee immediately elected COBRA coverage, the new guidance suspends the employee’s obligation to pay for benefits until the Outbreak Period ends.

The examples in the guidance explain that coverage for the former employees and dependents must remain active throughout the Outbreak Period, even if the former employees or dependents choose to delay electing COBRA or paying their premiums until after the Outbreak Period ends.  Coverage can be terminated retroactively if an employee does not elect COBRA by the 60th day after the Outbreak Period or pay their accrued premium balance by that date. However, the claims must be paid or pended in the meantime. This means employers and insurers may be left footing the bill when former employees are unable to pay their COBRA premiums or decline coverage.   

Additionally, if an employee elects COBRA coverage but does not submit payment during the Outbreak Period, they may accrue an eye-watering arrearage following several months of COBRA coverage.  The guidance does not require employers to forgive this debt, but collecting this arrearage may prove to be a futile effort.  In some cases, plans may retroactively terminate several months of coverage if a participant fails to pay their premiums when the Outbreak Period ends.

To add even more confusion, the new guidance contradicts the payment deadlines in the COBRA notices issued after March 1, 2020.  Even the new model notices the DOL issued earlier this month do not reference the new changes to the election and payment deadlines.  Given the recent rise in class actions targeting faulty COBRA notices, employers may want to consider sending a follow-up communication to any employee who was provided a COBRA packet on or after March 1, 2020. 

Employers caught some limited relief in the new guidance.  The deadline for providing the COBRA election notice to participants has also been suspended during the Outbreak Period.  However, this relief does not relieve employers of the headaches associated with the possible retroactive implementation (and, in some cases, cancellation) of COBRA coverage.  The guidance also makes clear that the deadline suspension cannot exceed the one-year limit imposed by ERISA Section 518 and Code Section 7508A.

In addition to the COBRA election and payment deadlines, the new guidance also extends other benefit deadlines during the Outbreak Period including:

  • requesting enrollment under a health plan pursuant to HIPAA’s special enrollment rights;
  • notifying the plan of a qualifying event or determination of disability; and
  • filing initial benefits claims, appealing denied claims, and requesting an external reviews.

Information contained in this publication is intended for informational purposes only and does not constitute legal advice or opinion, nor is it a substitute for the professional judgment of an attorney.