On March 13, 2020, President Trump declared a National Emergency concerning the novel coronavirus outbreak (COVID-19 National Emergency). To provide relief during the COVID-19 National Emergency, regulators released guidance (the Joint Notice) that extends the deadlines for a number of employee benefit plan requirements. Regulators were concerned that without these extensions, individuals might miss key deadlines during the pandemic that could result, for example, in a lapse of group health plan coverage or denial of a valid benefits claim. In separate guidance (Notice 2020-01), regulators also extended certain deadlines to help employers and other plan sponsors, fiduciaries, and service providers to meet some — but not all — of their ERISA obligations during the pandemic. This article — which has been updated to reflect DOL public comments clarifying the scope of relief provided by Notice 2020-01 — focuses on the health and welfare provisions; a separate GRIST reviews retirement plan provisions.
Relief under ERISA and the Internal Revenue Code (Code) applies during the “outbreak period,” defined as the period from March 1, through 60 days after the announced end of the COVID-19 National Emergency. Alternatively, the agencies can announce the end of the outbreak period and associated relief through a future notice. If the outbreak period ends at different dates in different parts of the country, the agencies will issue additional guidance. As of the date of this GRIST, the federal government has not announced the end of the COVID-19 National Emergency.
In any event, the relief can’t apply for more than one year. Under ERISA, the Department of Labor (DOL) is authorized to issue guidance disregarding a period of up to one year in determining the date by which any action is required or permitted to be completed. Relief applies if the employee benefit plan or its participants, plan sponsors, or plan administrators are in an area affected by a presidentially declared disaster, a terroristic or military action, or a public health emergency declared by the Secretary of Health and Human Services (HHS). Under ERISA, plans must be operated in accordance with plan terms, but plans won’t be treated as failing that requirement because they disregard any period of time allowed under the COVID-19 National Emergency relief.
COVID-19 National Emergency relief comprises:
The Department of Health and Human Services (HHS) has agreed to extend timelines similar to those under the COVID-19 National Emergency relief to state and local governmental group health plans and health insurance issuers that provide group health plan coverage. Additionally, HHS is encouraging non-federal governmental group health plan sponsors, states and issuers to extend similar relief to participants and beneficiaries as provided by the Joint Notice. This means that employer group health plans (including non-federal government employers) and their participants should be entitled to the COVID-19 National Emergency relief. Church plans should discuss with counsel whether any of the extended deadlines apply. In addition, DOL has issued FAQs to help health and retirement plan participants, beneficiaries and benefit plan sponsors understand their rights and responsibilities under Title I of ERISA.
DOL Notice 2020-01 grants health and benefit plan sponsors, fiduciaries, and service providers extra time to provide a number of required notices and disclosures and complete some — but not all — plan-related actions required by Title I of ERISA. This relief is described below.
DOL Notice 2020-01 extends the Form 5500 deadline relief previously announced by IRS (Notice 2020-23) to Form M-1. The extended deadline for any Form 5500 and M-1 filings is July 15 for any Form 5500 and M-1 filings otherwise due on or after April 1 through July 14. DOL’s new guidance doesn’t provide any Form 5500 filing extension that would provide relief to calendar year plans.
Under Notice 2020-01, a plan and its responsible fiduciary will not be in violation of ERISA for failing to timely deliver certain ERISA notices or disclosures due during the outbreak period, if they make a good-faith effort to deliver the notice or disclosure “as soon as administratively practicable under the circumstances.”
The deadline extension provided by disregarding the outbreak period applies to notices, disclosures and other documents required by Title I of ERISA, except for those addressed in the Joint Notice described below. For example, the relief applies to summary plan descriptions (SPDs), summary of material modifications (SMMs), summaries of benefits and coverage (SBCs), the COBRA general notice, the notice of unavailability of COBRA, the notice of early termination of COBRA, the HIPAA special enrollment rights notice, and explanation of benefits (EOB), among other ERISA notices and disclosures. See DOL’s reporting and disclosure guide for a comprehensive list of ERISA-required notices and disclosures. According to DOL regulator informal comments, the only ERISA-required notice or disclosure not covered by this relief is the COBRA election notice, since it is specifically addressed in the Joint Notice.
Plan sponsors may not rely on this relief to delay notices indefinitely, but won’t be penalized if circumstances make meeting delivery deadlines impossible during the outbreak period.
As part of their good-faith effort to deliver required documents, plans sponsors and administrators may use electronic-delivery methods, such as text messages, emails or websites, as long as the plan fiduciary reasonably believes recipients can easily access those means of communication. Plan sponsors and administrators can apparently use electronic delivery during the outbreak period, even if DOL’s current rules for group health plans and other benefits don’t allow it.
Notice 2020-01 doesn’t include relief for temporary delays in forwarding participant contributions to health plans. However, the Notice specifically says that DOL won't pursue enforcement action against an employer for a temporary delay — due solely to the COVID-19 pandemic — in forwarding participant contributions or loan repayments to an employee pension benefit plan. Even so, retirement plan employers and service providers still must act reasonably, prudently and in the interest of employees to forward contributions as soon as practicable under the circumstances.
Notice 2020-01 explains DOL’s general approach to enforcement during the COVID-19 emergency. To prevent loss or undue delay of benefits due to failure to meet established deadlines, the notice advises plan sponsors to make “reasonable accommodations” for participants and beneficiaries encountering problems due to the COVID-19 outbreak. DOL understands that plans and service providers may not be able to fully comply with requirements for claims processing and other actions required by ERISA. The agency will emphasize compliance assistance (rather than penalties) and provide grace periods and other relief where appropriate.
For group health plans, the Joint Notice requires plan sponsors and administrators to disregard the outbreak period when determining certain participant deadlines related to special enrollment periods, claims for benefits, appeals of denied claims, external reviews, and COBRA continuation coverage of certain claims. With regard to disability, retirement, and other plans, the relief provides additional time for participants and beneficiaries to make claims for benefits and appeal denied claims. Extended deadlines are discussed below.
HIPAA generally requires a special enrollment period for participants and their families under certain circumstances, including when an employee, or the employee’s spouse or dependent loses other coverage or when a person becomes a dependent of an eligible employee by birth, adoption, placement for adoption, or marriage. The special enrollment period normally is 30 days, but is 60 days if an employee or dependent loses eligibility for coverage under a state Medicaid or CHIP program or becomes eligible for state premium assistance under Medicaid or CHIP. Retroactive coverage is required only for special enrollments for birth, adoption or placement for adoption.
Relief provided. The Joint Notice disregards the outbreak period for purposes of calculating the 30- or 60-day special enrollment period. This extension may allow additional employees and dependents who may have missed the deadline for special enrollment to join group health plans.
Example: Assume the outbreak period ends on July 30. Mary is enrolled in her employer’s group health plan. On March 31, Mary has a baby and typically would have until April 30 to enroll the child in the group health plan. Because the outbreak period is disregarded for purposes of determining the special enrollment period, Mary has until August 29 to enroll her baby retroactively to the date of birth — provided Mary pays the premiums for any period of coverage.
ERISA covered plans must establish and maintain a procedure for filing claims and appealing adverse benefit determinations. For example, a plan may establish a period of one year for filing an initial claim. Group health plans and disability plans must provide claimants at least 180 days following receipt of an adverse benefit determination to appeal (60 days in the case of pension plans and other welfare benefit plans).
The new rule disregards the outbreak period for determining when the following must be filed:
Example. Assume the outbreak period ends on July 30, 2020. Peter is a participant in a group health plan. On March 1, 2020, Peter received medical treatment for a condition covered under the plan, but didn’t submit his claim until April 1, 2021. Under the plan, claims must be submitted within 365 days of the participant's receipt of the medical treatment. Under the new rule, the outbreak period is disregarded for purposes of determining the 365-day period applicable to Peter’s claim. Peter's last day to submit a claim is 365 days after July 30, 2020, which is July 30, 2021.
The relief also applies to claims under a health reimbursement arrangement (HRA) or health flexible savings account (health FSA), and could complicate administration of 2019 calendar-year plans with a 90-day runout period. The extended deadline doesn’t apply to dependent care FSAs because they are not subject to ERISA.
Example: Assume the outbreak period ends on July 30, 2020. Peter elected to contribute to a 2019 health FSA that, under the terms of the plan, allows him to submit claims incurred in 2019 until the end of March 2020 under a runout period. Due to the COVID-19 National Emergency relief, Peter now has 31 days after the end of the outbreak period to submit claims incurred in 2019. This means the plan cannot require a forfeiture of any of the remaining balance of Peter’s health FSA during the outbreak period and until Aug. 30, 2020.
The Affordable Care Act (ACA) outlines standards for nongrandfathered group health plans and for health plan insurance issuers offering nongrandfathered group health plans to provide for an external review process. For plans using the federal external review process, a participant has four months after receipt of an adverse benefit determination to file an adverse benefit determination. Additionally, the federal external review process must provide a notification that describes the information or materials needed to make the request complete, and the plan or issuer must allow a claimant to perfect the request for external review within the four-month filing period or within the 48-hour period following the receipt of the notification, whichever is later.
The new rule disregards the outbreak period for determining the deadlines:
Example. Assume the outbreak period ends on July 30, 2020. During the outbreak period, Ann received an adverse benefit determination after exhausting her appeals under her employer’s group health plan. The outbreak period is disregarded for purposes of determining the period during which Ann may request an external review under the federal process, so the last day she could ask for an external review is presumably Nov 30. If her request needed to be perfected, Ann would have until the later of 48 hours following the request or the end of the four-month period.
The relief provided by the Joint Notice disregards the outbreak period for purposes of determining the deadlines for a participant or qualified beneficiary to:
Depending on how long the outbreak period lasts, this relief could drastically extend the period during which a qualified beneficiary is able to give notice of qualifying events and disability determinations, and elect COBRA retroactively back to the date of the qualifying event or loss of coverage. Nevertheless, qualified beneficiaries may be reluctant to elect COBRA retroactively for several months, as it would be costly to pay for that coverage in a lump sum.
The relief also provides an extended period of time to pay any COBRA premiums — and coverage cannot be denied once COBRA is elected and payments are eventually made and applied retroactively. Under existing COBRA rules, group health plans have the discretion to cancel or continue COBRA continuation coverage after it is elected until the plan receives payment of COBRA premiums, and are required to provide notice to providers about coverage during that period. This particular rule is apparently unaffected by the COVID-19 National Emergency relief. Plans may want to reconsider how to handle payment of claims during this period, given the extended deadlines for paying COBRA premiums. Regardless, plans will need to continue complying with the rules as they relate to the required notices to providers.
COBRA election period. A qualified beneficiary typically has at least 60 days to elect COBRA coverage, starting on the date the election notice is sent. When it’s elected within that time frame, COBRA coverage is effective retroactively to the date of the qualifying event (or loss of coverage, if later). The Joint Notice relief disregards the entire outbreak period for the purposes of determining COBRA election deadlines.
Example: Sam participates in his employer’s group health plan, but his hours are reduced and he no longer meets the plan's eligibility requirements. Sam’s coverage will terminate on March 31 if he doesn’t elect COBRA. Sam’s employer provides him a COBRA election notice on April 1. Assuming the outbreak period ends on July 30, Sam has until Sept. 28 to make his election (60 days after the end of the outbreak period). Sam elects COBRA on Sept. 28, with coverage effective retroactively to April 1.
Initial COBRA premium payment. Typically, the deadline for the initial payment is 45 days after the COBRA election. If this deadline falls within the outbreak period, it is automatically extended. For example, if COBRA was elected on Feb. 1, the initial payment would have been due by March 17, but because of the relief provided by the Joint Notice, the deadline was paused on March 1 and the new deadline is 17 days after the end of the outbreak period. The extension of the initial payment deadline gets more complicated for COBRA periods that begin during the outbreak period.
Example: Continuing with Sam from the previous example — the initial month of Sam’s COBRA coverage is April. Typically, Sam’s first COBRA premium would be due 45 days after the COBRA election. In the absence of the Joint Notice relief, this payment would have been due by July 15 at the latest (60 days to elect, plus 45 days to pay). But the outbreak period did not end until July 30 and Sam didn’t elect COBRA coverage until Sept. 28. If his initial premium payment is due 45 days after his election, it’s not due until Nov. 12. Once the full premium is paid, the plan will need to pay for any claims that Sam has incurred since April 1.
Ongoing COBRA premium payments. Typically, payments following the initial COBRA premium payment are considered timely if made within 30 days from the due date. The Joint Notice provides that the outbreak period should be disregarded in calculating this 30-day period. If COBRA is already in place before the outbreak period begins, any payments due during the outbreak period will be considered timely if made within 30 days of the end of the outbreak period. It’s more complicated, however, for COBRA coverage that begins during the outbreak period.
Example: Continuing with Sam from the previous two examples — Sam owes ongoing COBRA premiums beginning in May. Assuming the deadline for payments for May, June and July all fall within the outbreak period, the payments will be considered timely if made by Aug. 29 (30 days after the end of the outbreak period). But that would mean these premium payments are due even before Sam makes his COBRA election. In addition, there would be no deadline extension for premium payments due for the months of August or September, even though the COBRA election isn’t made until Sept. 28.
Although the issue of ongoing premiums being due before the COBRA election is made predates the Joint Notice, extended outbreak period deadlines and resulting premiums owed may exacerbate the problem. COBRA regulations allow payments to be considered timely — even if they are made beyond 30 days from the due date — if the terms of the plan allow for a later payment date. This means a plan could consider Sam’s payment of all outstanding COBRA premiums timely if made 45 days after his COBRA election. If payment is not made, Sam would not be entitled to coverage for any claims incurred after March 31.
Notice of qualifying event or determination of disability. COBRA requires individuals to notify the plan of a qualifying event (divorce, a dependent child aging off the plan, or a determination of disability), generally within 60 days of the event or determination, or a longer period if allowed by the plan. Any notification periods running past March 1 will be paused until the end of the outbreak period.
The Joint Notice also specifically provides that group health plans may disregard the outbreak period when determining the date on which the COBRA election notice must be provided to qualified beneficiaries. The COBRA election notice is typically due within 14 days after the employer or qualified beneficiary notifies the plan administrator of the qualifying event. If the employer is also the plan administrator, it must provide the notice no later than 44 days after the date on which the qualifying event occurred; or if the plan provides that COBRA continuation coverage starts on the date of loss of coverage, the date of loss of coverage due to the qualifying event. For qualifying events that occur after March 1, these time periods will not start to run until the outbreak period is over.
If a COBRA election notice is delayed until the outbreak period ends, similar premium payment timing issues, such as those noted above, could arise. Depending on the length of the outbreak period, COBRA could be elected many months after the qualifying event. Coverage would be effective retroactively, but only if the initial and subsequent premium payments are made. The required timing of those payments is unclear.
DOL recently issued updated model general and election notices — in English and Spanish — intended to help Medicare-eligible individuals make key decisions regarding their health coverage when they have a COBRA qualifying event. Model notices are authorized by longstanding DOL regulations and, when completed accurately and distributed on a timely basis, are considered by DOL to constitute compliance with COBRA notice requirements. Nevertheless, even when using the DOL model notice, plan sponsors risk lawsuits from individuals under ERISA section 502, alleging the notice is statutorily deficient. Also, the new notices do not address the newly extended COBRA deadlines. To date, the DOL hasn’t announced whether it is planning to update the notices to reflect the pandemic relief.