The $1.9 trillion stimulus bill that President Joe Biden signed earlier this month will completely pay COBRA premiums for laid off employees, and the legislation extends tax credits for businesses that continue to pay for COVID-19 related leave.
Our colleagues at SESCO Management Consultants provide this rundown of key points about that legislation and about new deadlines affecting COBRA.
The requirement for employers to provide paid sick and family leave under the Families First Coronavirus Response Act (FFCRA) expired on Dec. 31, 2020. Employers with less than 500 employees that voluntarily continued to provide paid leave after Dec. 31, 2020 have been able to claim a federal tax credit for paid leave provided through March 31, 2021. But the stimulus measure now extends that federal tax credit through Sept. 30, 2021.
The new stimulus law also allows individuals eligible for coverage under the Consolidated Omnibus Budget Reconciliation Act (COBRA) to maintain their employer-sponsored coverage after a layoff, reduction in hours, or furlough without paying any premiums through Sept. 30, 2021. The legislation also provides a refundable tax credit for employers and group health plans for the full amount of COBRA coverage premiums.
DOL and IRS Updated Guidance on COBRA
In May 2020, the U.S. Department of Labor and the Internal Revenue Service issued a rule extending certain timeframes for group health plans and other welfare and pension plans. Under that rule, plans had to disregard the period from March 1, 2020 until 60 days after the announced end of the National Emergency related to the COVID-19 outbreak (which at this time is still an undetermined date). In the rule, this period is referred to as the “Outbreak Period.” The rule provided that the relief applied in determining deadlines such as: the 60-day election period for COBRA continuation coverage, the date for making COBRA premium payments, and the date for individuals to notify the plan of a qualifying event.
Under he DOL and IRS updated guidance, applicable periods must be disregarded until the earlier of:
- 1 year from the date first eligible for relief, or
- 60 days after the end of the Outbreak Period.
From and after that date, the guidance explains that “the timeframes for individuals and plans with periods that were previously disregarded under the [Rule] will resume. In no case will a disregarded period exceed 1 year.” The Guidance provides two examples:
- A qualified beneficiary who would have been required to make a COBRA election by March 1, 2020 has until February 28, 2021, which is the earlier of 1 year from March 1, 2020 or the end of the Outbreak Period.
- A qualified beneficiary who would have been required to make a COBRA election by March 1, 2021, need not make his or her election until the earlier of 1 year from that date (i.e., March 1, 2022) or the end of the Outbreak Period.
The determination is made on a participant-by-participant basis with each participant having his or her own tolling period.
Where the plan administrator knows, or should reasonably know, that the end of the relief period for an individual action is exposing a participant or beneficiary to a risk of losing benefits, the administrator is admonished under the guidance to provide notice regarding the end of the relief period. This means that plan disclosures issued prior to or during the pandemic may need to be reissued or amended.