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Agencies Revise—and Complicate—COBRA Deadline Extensions

New guidance extends 'outbreak period' relief that was set to expire

March 3, 2021 | Stephen Miller, CEBS

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[updated on 3/8/21]

Federal agencies issued new guidance addressing pandemic-related extended deadlines for electing COBRA health care continuation coverage and for filing health plan claims and appeals, among other issues, but some are warning that the new relief will be administratively burdensome for employers and plan administrators.

On Feb. 26, the U.S. Department of Labor (DOL), Treasury and IRS issued Notice of Extension of Certain Timeframes for Employee Benefit Plans, Participants, and Beneficiaries Affected by the COVID–19 Outbreak. At the same time, the DOL's Employee Benefits Security Administration issued Disaster Relief Notice 2021-01.

Together, the new guidance adjusts earlier deadline extensions for COBRA and other affected benefits plans that were set to expire March 1.

"In recent months, there has been widespread confusion among plan sponsors as to when and if the prior Department of Labor guidance extending certain plan participant timeframes would lapse," the American Benefits Council, which represents large employers that sponsor or administer health and retirement benefits, noted in a Feb. 26 statement. "The council had advocated for a clear end to the guidance at the end of February 2021—one year from when relief first [retroactively] began … However, the Department of Labor's interpretation extends the guidance for the foreseeable future."

To understand how the new guidance applies, it's necessary first to look back at the agencies' prior deadline relief, which assumed that the pandemic's "outbreak period" and the presidentially declared "national emergency" would not last for more than one year.

Earlier Relief Was Expiring

In May 2020, the DOL and the IRS released a final rule that temporarily extended the period in which eligible employees can elect COBRA coverage, and the deadline for them to begin making COBRA premium payments, beyond the pandemic outbreak period, which it defined as running from March 1, 2020, to 60 days after the end of the declared COVID-19 national emergency, or another date if provided by the agencies in future guidance. The rule applied as follows:

The COBRA election period. Under COBRA, employees and dependents who lose active coverage as a result of a qualifying event, such as termination of employment or reduction of hours, normally have 60 days to elect continuation of coverage after receiving a COBRA election notice. Under the rule, the 60-day timeframe doesn't start until the end of the outbreak period.

The COBRA premium payment period. COBRA enrollees normally have 45 days from their COBRA election to make the first premium payment, and subsequent monthly payments must be made within a 30-day grace period that starts at the beginning of each coverage month. The rule extended the initial premium payment and grace period deadlines beyond the outbreak period.

No extension was granted for the 14-day deadline for plan administrators to furnish COBRA election notices.

The DOL acted within the powers granted to it under the Employee Retirement Income Security Act (ERISA), but the statute only allows the DOL to disregard for up to one year compliance deadlines by an employee benefits plan, plan sponsor, plan administrator, participant or beneficiary. Since the deadline suspension was retroactive to March 1, 2020, this relief, in accordance with ERISA, was set to expire after Feb. 28, 2021.

[SHRM members-only how-to guide: How to Administer COBRA]

New Guidance on Outbreak Period Deadlines

Federal agencies issued their new guidance just two days before the Feb. 28 one-year expiration date and with the national emergency still ongoing.

Under the new guidance, deadlines regarding COBRA, HIPAA special enrollments, and benefits claims and appeals timeframes will now end as of the earlier of:

One year from the date the deadline would have occurred after March 1, 2020, absent the previous extension guidance.

60 days after the announced end of the national emergency.

In an alert, the Groom Law Group advised that "the guidance directs that COVID-19 extensions will continue past Feb. 28, and that all such extensions must be measured on a person-by-person basis—which was not clear from the prior guidance." Benefits plan and COBRA administrators, third-party administrators [TPAs] and insurers "may have to reconsider their administrative practices in light of this new direction [as] it is unclear how plans, TPAs, and insurers will be able to build their systems to create custom COBRA, special enrollment, and claims deadlines" on an individual basis. In addition, "DOL seems to be saying that plans may need to notify each individual when his or her one-year extension is about to be up."

Many plan sponsors "may have to extend the deadlines for all while they determine how to proceed," Groom Law noted. "This complexity will be even greater if COBRA subsidies are enacted" under the stimulus measure that the U.S. House passed on Feb. 26.

According to Gary Kushner, president and CEO of HR and benefits consulting firm Kushner & Company in Portage, Mich., "Effectively, the guidance says that all of the 'pause' buttons [for deadline relief] are on an individual-by-individual rolling basis." He gave the following examples of how the new rolling deadlines would work:

For an employee whose employment ended before March 1, 2020, but whose COBRA 60-day election timeline had already started to run but not yet expired, the timeline suspensions ended on Feb. 28, 2021.

For an employee whose timelines would have started running after March 1, 2020, but-for the suspended timelines, those timelines will continue to be "paused" for up to one year from the date they would have started, or 60 days after the president declares an end to the pandemic's national emergency, whichever occurs first.

Working with TPAs, Notifying Participants

"Since the DOL delay notice requires a case-by-case review of an individual's entitlement to elections and other benefits rights, administrators will have to understand the individual needs of each participant," said Kathryn Bakich, national health compliance practice leader at HR and employee benefits consultancy Segal in Washington, D.C. Segal has posted an analysis of the new guidance.

"Employers and their administrators should determine what type of notices or other announcements they need to send out, including whether a general notice would suffice or if more individualized communications are needed," Bakich explained. "Notices that were sent previously (such as inserts with COBRA election notices) should be reviewed and revised as necessary for use going forward."

Law firm Jackson Lewis advised health plan sponsors to:

Contact all COBRA and other TPAs to execute a plan of action for notification to all existing and COBRA eligible individuals regarding any applicable deadlines.

For terminated employees who have deferred making a COBRA election for any periods on or after March 1, 2020, consider whether new notices should be issued with updated coverage and rate options, and current election and payment deadlines. Consider starting the deadlines from the date that notice is mailed so the individual has a fair opportunity to evaluate the need for coverage.

For those who are already enrolled in COBRA but who have been deferring payment for coverage, provide initial notice and demand payment of all prior months' premiums that may be owing. Where this involves many months, consider providing a period over which such individuals can make installment payments with a "grace period" for full and complete payment before COBRA coverage terminates.

Attorneys at Winston & Strawn explained that "due to the individual-by-individual nature of the guidance, we encourage plan sponsors to speak with their benefits and COBRA administration vendors" to determine what actions should be taken to comply with the new guidance.

They also advised updating posted communications about these extensions on benefits websites, COBRA forms, HIPAA special enrollment notices and in other group health plan communications.

Update: Interplay with COBRA Subsidy

The federal government will subsidize 100 percent of COBRA insurance premiums for employees who lost their jobs because of the pandemic, and for their covered relatives, through Sept. 30, 2021, under the American Rescue Plan Act stimulus legislation.

"Hopefully, the DOL will be issuing clear guidance and compliance assistance to clarify the interplay between the federal government's new COBRA subsidy and the individualized one-year extensions," said Timothy S. Klimpl, an attorney in the Stamford, Conn., office of law firm Carmody.

"Together with the individualized one-year election and payment extensions, employers will be facing a tremendous administrative and compliance challenge implementing the COBRA subsidy" he said.

While employers may be able to outsource administration of the subsidy to their COBRA TPAs to some extent, "employers ultimately remain responsible for compliance," Klimpl noted.

TPAs also "will depend on employers to report terminated employees and beneficiaries who may be newly eligible for the special election and subsidy, including in some cases several months after a separation from employment that occurred during the [COVID-19] outbreak period," he explained.

Related SHRM Articles:

Biden Signs Stimulus Bill with 100% COBRA Subsidy Through September, SHRM Online, March 2021

Clock May Be Ticking on Suspended Benefit Deadlines, SHRM Online, February 2021

When Can Employers Terminate COBRA Coverage During the COVID-19 Outbreak Period?, SHRM Online, November 2020

DOL Temporarily Extends COBRA Sign-Up Deadlines, SHRM Online, May 2020

Will New COBRA Notices Help Retirees Avoid Medicare Mistakes?, SHRM Online, May 2020