DOL Issues Clarification on Timeline Extensions and Outbreak Period
Notice 2021-01 and its impact on COBRA Extensions
In response to the COVID 19 outbreak, the Department of Labor, and the IRS (collectively, the “Agencies”) issued guidance in April of 2020 pausing certain deadlines, including but not limited to certain COBRA deadlines, during the “Outbreak Period.” The Agencies defined the Outbreak Period as the “period beginning March 1, 2020 through the date that is 60 days after the end of the National Emergency declared by the President.” It was during this “outbreak period” that plans were required to stop counting with respect to affected time periods. Once the Outbreak Period ends, the plans would begin counting again.
Although the end of the outbreak period was defined as 60 days after the announced end of the National Emergency, the “Outbreak Period”, which was a product of ERISA Section 518, was subject to a maximum of 1 year prescribed by ERISA Section 518. As a result, many believed the Outbreak Period was going to expire on February 28, 2021 (1 year from the start of the Outbreak Period, March 1, 2020).
On Friday, February 26, 2021, the Department of Labor released EBSA Disaster Relief Notice 2021-01, which stated that the “Outbreak Period” will not expire in its entirety on February 28, 2021.
Notice 2021-01 states that the “outbreak period” is still ongoing and that it will end in its entirety, as indicated in the original guidance, 60 days after the declared end to the National Emergency. However, the 1 year maximum in ERISA 518 applies to each individual time period affected by the outbreak period. Consequently, the “outbreak period” with respect to a particular time period cannot exceed more than (a) 1 year from the date an individual was first eligible for relief, or (b) 60 days after the announced end of the National Emergency (the end of the Outbreak Period in its entirety). Once the outbreak period ends, the time periods that were tolled during the outbreak period resume.
We’ve provided examples below to help illustrate the guidance provided in Notice 2021-01.
- If a Qualified Beneficiary’s COBRA election period began on February 1, 2020, the 60-day time period for making an election would have paused 29 days into the 60 day election period–March 1, 2020 (date the Outbreak Period went into effect). In this example, the outbreak period for this Qualified Beneficiary ends on 2/28/21-1 year after the Qualified Beneficiary was first eligible for the Outbreak Period relief. Beginning March 1, 2021, the election period clock resumes and this Qualified Beneficiary will have 31 additional days to make her election (remember, 29 days of the 60 day election period had already expired last year). NOTE: According to the guidance, plan sponsors and administrators should consider reasonable accommodations for those who may soon be losing coverage unless action is taken.
- A COBRA election period begins 5/1/2020. In the absence of the “Outbreak Period”, an individual would have had until June 29, 2020–60 days from 5/1/2020- to elect COBRA; however, the entire 60 day election period is subject to the Outbreak Period. Assuming the Outbreak Period has not ended in its entirety, the Outbreak Period for this Qualified Beneficiary with respect to this COBRA election period will end on 4/30/2021-1 year after the start of the election period that began during the Outbreak Period. Beginning May 1, 2021, this Qualified Beneficiary will have until June 29, 2021—60 days—to make her COBRA election.
NOTE: The guidance provides an easy to apply rule when identifying the new due date when the 1 year rule applies. This easy to apply rule may help in communicating the new date. In that case, instead of measuring 1 year from the beginning of the affected election period and then adding the days in the election period that were not counted during the outbreak period, simply add 1 year to the otherwise applicable due date to identify the new due date. Thus, instead of measuring 1 year from May 1, 2020 in the example above and then adding 60 days, you can just add 1 year from the original due date—June 29, 2020 to identify the new date election due date, June 29, 2021. It gets you to the same place either way.
- A COBRA Premium Payment for March 2020 was due March 1, 2020, subject to a grace period ending 3/31/20. The premium was not paid. The 1 year period ends March 1, 2021 and payment can now be required by 3/31/21. Although not clear, conservative employers will not require payment of the April 2020 premium until April 30, 2021 (assuming the March 2020 premium is timely paid).
Conclusion
This event- to-event, person-by-person application of the rules will add a new element of complexity to benefits administration for the immediate future. To that end, the DOL specifically directs plan sponsors (the employer) to act in the best interest of plan participants.
OCA has updated our notices to reflect the new guidance. Below is a sample of our new communication
The full text of the Notice is available here: