The IRS (with the concurrence of the DOL and HHS) has issued new guidance explaining how the extension of the deadline for paying COBRA premiums will be applied.

The extension of deadlines for individuals to elect COBRA and pay for COBRA premiums on account of the COVID-19 pandemic remains in effect. These rules operate by requiring employers to disregard a particular period in determining when COBRA elections and premiums are due. This period (the Outbreak Period) lasts until 60 days after the declared end of the national COVID-19 emergency, but no more than one year. Given that the deadline for paying COBRA premiums is ordinarily 45 days after the COBRA election, some might have assumed that the deadline extensions for COBRA elections and payment would run consecutively. In other words, an individual who has a qualifying event under COBRA would have an extended period to make the COBRA election and, after that, another extended period to pay the first premium. Under that interpretation, the total extended period could then last up to two years (the maximum period of each extension) plus 105 days (the ordinary periods of 60 days to elect COBRA and 45 days to pay the first COBRA premium).
The new IRS notice provides a different interpretation. The notice:

• Clarifies that the extension for the election and premium run consecutively only for individuals who make their COBRA elections within the ordinary 60-day election period (without the extension). Otherwise, the period for electing and paying for COBRA coverage will run concurrently. Under this new guidance, an individual will have one year and 60 days to make the COBRA election and one year and 105 days to pay the premium. The clock for each will start on the date that the COBRA notice is provided. [Technically, the clock would start when coverage, absent a COBRA election, would be lost, if that occurs later than the notice, but the new guidance uses the COBRA notice as the start date.]
• Provides relief to those who may have thought that they had a longer period to pay the premium. Those individuals must be given until at least November 1, 2021, to pay the first premium, as long as that premium is paid within one year and 45 days of their COBRA election.
• Requires the first payment to cover at least the period that it would have needed to cover in the absence of the extension (typically the first three months of COBRA continuation coverage). Monthly premiums may then start to be paid. They will be applied retroactively to coverage provided up to a year (or, with the COBRA grace period, a year plus 30 days) before the payment is made.
• Confirms that the deadline extensions generally do not apply to elections for subsidized COBRA coverage under American Rescue Plan Act.

In view of the wide array of scenarios that could arise from the deadline extensions, the new guidance includes ten examples of how the new guidance will apply.
Plan sponsors should consider the effect of this guidance (and the deadline extensions generally) on their COBRA administration and the collection of COBRA premiums.