Subsidized COBRA Elections under ARPA Override COBRA Election Deadline Extensions
As detailed in our SW Benefits Update, “Ironing Out the Wrinkles – IRS Answers 86 Questions About COBRA Relief Under the American Rescue Plan Act,” the IRS recently released Notice 2021-31 (the “Notice”), providing welcome guidance on the COBRA election and subsidy requirements under the American Rescue Plan Act (“ARPA”). As mentioned in that SW Benefits Update, the Notice included some unexpected guidance regarding the impact of ARPA COBRA elections on the COBRA election deadline extensions under the Joint Notice and EBSA Disaster Relief Notice 2021-01 (the “Disaster Relief”).
In part, the Notice provides that an individual who elects subsidized COBRA coverage under ARPA, effective April 1, 2021, must also elect or decline COBRA coverage retroactive to their loss of coverage before April 1, 2021 (if applicable). If an individual elects subsidized COBRA coverage under ARPA without electing coverage retroactive to their qualifying event, the individual cannot later elect such retroactive COBRA coverage, despite the deadline extensions under the Disaster Relief. It appears, however, that individuals who do not elect subsidized COBRA coverage under ARPA will retain their right to elect retroactive coverage within their extended deadline provided by the Disaster Relief. Q&A-53, 56, and 59 of the Notice address this issue.
The following example illustrates the way in which these rules interact:
Sally was involuntarily terminated and lost coverage under her employer’s group health plan on December 31, 2020. Sally received a COBRA election notice on January 1, 2021. Normally, Sally would be required to elect COBRA by March 1, 2021. Under the deadline extensions provided by the Disaster Relief, Sally’s deadline to elect COBRA retroactive to January 1, 2021 would be March 1, 2022 or, if earlier, 60 days after the end of the Outbreak Period (i.e., 60 days after the announced end of the COVID-19 National Emergency). Despite this extension, Sally’s deadline to elect COBRA retroactive to January 1, 2021 will depend on whether she elects subsidized COBRA coverage under ARPA, effective April 1, 2021:
1. If Sally does not elect subsidized COBRA coverage under ARPA, then she may be able to elect COBRA coverage retroactive to January 1, 2021, as long as she elects such coverage by the extended deadline identified above under the Disaster Relief.
2. If Sally timely elects subsidized COBRA coverage under ARPA but not retroactive COBRA coverage, she may be found to have waived her right to later elect coverage retroactive to January 1, 2021.
Unfortunately, the DOL’s model ARPA notices fail to mention this very important rule.
The qualified beneficiaries who are affected by this new rule were generally required to receive their ARPA election notice by May 31, 2021. Therefore, group health plans may want to quickly consider whether and how to explain this rule to affected qualified beneficiaries before they inadvertently waive their retroactive election rights under the Disaster Relief.
For more information about the deadline extensions, see our SW Benefits Update, “Help for Employees Can Equal Headaches for Employers: Agencies Issue More Health and Welfare Relief for COVID-19.” For more information about ARPA and the DOL model ARPA notices, see our SW Benefits Updates, “‘Help Is on the Way’ – Important Changes to COBRA Under the American Rescue Plan Act” and “DOL Clarifies Key Provisions, Issues Model Notices for COBRA Relief Under ARPA.”