372 / What was the COBRA election window and subsidy for 2020 and 2021?

Editor’s Note: In response to COVID-19, the IRS and DOL announced an extension of the 60-day COBRA election window. The 60-day election window was paused for relevant time periods that included March 1, 2020. The clock was stopped and did not resume ticking until the end of the “outbreak period”. The outbreak period is defined as the window of time beginning March 1, 2020 and ending 60 days after the date that the COVID-19 national emergency is declared ended. The 45-day payment clock and 30-day grace period for late COBRA payments were also paused. The outbreak period ended effective May 11, 2023. Pre-pandemic rules once again became effective July 10, 2023.

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Planning Point: Under ERISA, the government only has authority to order relevant time periods to be disregarded for one year.

The IRS, Department of Treasury, HHS and DOL clarified that taxpayers subject to the relief will have the applicable periods disregarded until the earlier of (a) one year from the date they were first eligible for relief or (b) 60 days after the announced end of the national emergency (the end of the outbreak period). On the applicable date, the timeframes for individuals and plans with periods that were previously disregarded resumed. In other words, in no case could a disregarded period exceed one year.¹

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An example can illustrate application of the tolling period. Assume the individual terminated employment on February 20, 2020, beginning the 60-day clock to make a COBRA election. Nine days elapsed between February 20 and March 1, when the clock was paused. If the emergency period had ended June 1, 2020, the clock would begin running 60 days later. When the clock began again, the individual would have 51 remaining days to make a COBRA election.²

The American Rescue Plan Act of 2021 (ARPA) provided free COBRA coverage for a six-month period between April 1, 2021 through September 30, 2021 for employees and their family members who lost group health coverage because of involuntary termination or reduced work hours. The COBRA subsidy applied to all employees who lost employer-sponsored health care due to an involuntary loss of work since the COVID-19 pandemic began. Employees who lost coverage as of April 2020 were potentially eligible for the entire six-month subsidy. Those employees’ 18-month COBRA period included the period from April 1 through September 30, 2021. However, individuals who were eligible for other group health coverage or Medicare were not eligible for the subsidy. The subsidy was available to both employees who did not elect COBRA coverage during the original election period and those who initially elected COBRA, but let coverage lapse. These individuals had to be offered an additional 60-day window to elect COBRA coverage and were not required to pay retroactive premiums to the original loss-of-coverage date. Plan administrators were required to begin notifying eligible individuals of the subsidy within 60 days of April 1, 2021.