DOL and Treasury Issue Extended Deadlines for Employee Benefit Plans Due To COVID-19

The U.S. Departments of Labor (DOL) and Treasury issued joint guidance on April 28 extending deadlines for COBRA, special enrollment periods, benefit claims, appeals and external reviews, employer and plan notices and other disclosures due to the impact of COVID-19. The guidance, which applies to ERISA-governed health and welfare plans and retirement plans, consists of:

• EBSA Disaster Relief Notice 2020-01 (the “EBSA Notice 2020-01”) – extends the time for plans to furnish ERISA-required notifications, including Summary Plan Descriptions (SPDs), Summaries of Material Modifications (SMMs), and benefit determinations, as long as there is a good faith effort to furnish the documents as soon as administratively practicable, and provides other relief from certain other ERISA requirements in connection with the COVID-19 pandemic.
• DOL, EBSA, IRS and Treasury Joint Notice (the “Joint Notice”) – extends certain timeframes affecting participants’ special enrollment elections under HIPAA and continuation of group health plan coverage under COBRA. The Joint Notice also extends the time for plan participants to file or perfect benefit claims or appeals of denied claims.
• COVID-19 FAQs for Participants and Beneficiaries – provides guidance directed to welfare and retirement plan participants impacted by COVID-19 regarding the extensions announced in the Joint Notice and their related rights and responsibilities under ERISA.

The new guidance covers the time period between March 1, 2020, and 60 days after the announced end of the COVID-19 National Emergency or other date announced by the Employee Benefits Security Administration, DOL, Internal Revenue Service, and Treasury (collectively, the “Agencies”) (the “Outbreak Period”). To the extent the emergency ends on different dates for different parts of the country, the Agencies will issue additional guidance regarding the application of the relief to those areas. The guidance effectively tolls the deadlines for various actions until after the conclusion of the Outbreak Period.

The following summarizes the guidance provided in EBSA Notice 2020-01 and the Joint Notice as well as special considerations and actions plan sponsors may need to take to comply with this guidance.

EBSA Notice 2020-01

The DOL issued EBSA Notice 2020-01 providing specific relief for certain employee benefit matters during the Outbreak Period.  Below is a summary of the relief provided. 

Employee Benefit Plan Notices, Disclosures and Document Relief:

The DOL stated that an employee benefit plan and the responsible plan fiduciary will not be in violation for failing to meet ERISA Title I notice, disclosure and/or document requirements over which the DOL has interpretive and regulatory authority, so long as the plan and responsible plan fiduciary act in good faith and furnish the required notices, disclosures or documents as soon as administratively practicable under the circumstances.  For this purpose, “good faith acts” include the use of electronic alternative means of communicating with participants and beneficiaries who the plan fiduciary reasonably believes have effective access to electronic means of communication, including email, text messages and continuous access websites.  From a practical standpoint, this guidance effectively relaxes the current DOL rules regarding the ability for plan sponsors and plan administrators to utilize electronic disclosures.

Some of the notices, disclosures and documents that are impacted by this relief include:

• SPDs
• SMMs
• Summary Annual Reports
• Notification of Benefit Determinations for claims procedures
• Periodic Pension Benefit Statements
• Statement of Accrued and Nonforfeitable Benefits
• Qualified Domestic Relations Order Notices
• Section 404(c) Plan Disclosures
• Qualified Default Investment Alternative Notices
• Automatic Contribution Arrangement Notices
• Annual Funding Notices

Plan Loans and Distributions under the CARES Act:

This relief is similar to the procedural relief issued for plan sponsors in the wake of Hurricane Harvey allowing participants to take advantage of a hurricane disaster distribution, increased plan loan amounts and delayed repayment provisions.  Specifically, if a plan sponsor does not follow the procedural requirements for retirement plan distributions (excluding the Qualified Joint and Survivor Annuity waiver and spousal consent requirements, which are IRS requirements) or loans under the terms of the plan, the DOL will not treat this as a failure (including triggering a prohibited transaction) if the failure is solely attributable to the COVID-19 outbreak, and the plan administrator both makes a good-faith diligent effort under the circumstances to comply with those regulations and makes a reasonable attempt to correct any procedural deficiencies such as assembling any missing documentation, as soon as administratively practicable.  The DOL also stated that there will not be a prohibited transaction violation if (i) a plan fails to meet the adequate security and reasonably equivalent basis plan loan requirements as a result of allowing increased loan amounts and/or (ii) there are repayment delays in compliance with the CARES Act and related IRS guidance.

Delinquent Participant Contributions & Loan Repayments:

Failure by a plan sponsor to timely contribute participant contributions and loan repayments to a qualified plan triggers a prohibited transaction and is a fairly common error among plan sponsors.  The DOL stated that it will not take enforcement action with respect to a plan sponsor’s temporary delay in forwarding such payments or contributions, as long as the plan sponsor acts reasonably, prudently, and in the interest of employees to comply as soon as administratively practicable under the circumstances.  Notably, the DOL did not offer a prohibited transaction exemption for this failure, but only relief for enforcement action against the plan sponsor.  Practically, this relief seems to provide a plan sponsor the ability to rely on the DOL’s non-enforcement action without having to file under the DOL’s Voluntary Fiduciary Correction Program.

Blackout Notices:

Any time a defined contribution plan temporarily restricts, limits or suspends a participant’s ability to direct investments or obtain loans or distributions, a blackout notice is required at least 30 days in advance of such change.    An exception to the 30-day advanced notice is allowed if the delay is due to events beyond the reasonable control of the plan administrator and the plan fiduciary determines this in writing.  The DOL stated that it will not require the written determination by the plan fiduciary and provides general relief for late blackout notices as a result of the COVID-19 pandemic, because it stated that pandemics are by definition beyond a plan administrator’s control.

General ERISA Fiduciary Compliance:

While the DOL did not give specific relief to any breach of fiduciary duty under ERISA, it did state that plan fiduciaries should make reasonable accommodations to prevent the loss of benefits or undue delay in benefits payments and attempt to minimize the possibility of individuals losing benefits because of the fiduciaries’ failure to comply with pre-established timeframes.  Also, with regard to any failure to meet timeframes for any claims procedures requirements, the DOL said that it will approach these failures with an emphasis on assisting compliance and providing grace periods and other relief where appropriate. 

Joint Notice

The Joint Notice issued by the Agencies extends certain timeframes affecting a plan participant’s rights to (i) request mid-year enrollment in group health plan coverage, (ii) enroll in and pay for COBRA coverage, and (iii) file or perfect benefit claims or appeals. To minimize the possibility of individuals losing benefits because of a failure to comply with certain plan deadlines, the Joint Notice requires that plans disregard any days within the Outbreak Period when determining the periods and deadlines noted below.  In other words, these deadlines do not apply during the Outbreak Period and do not start to run again until after the Outbreak Period is over.

The extensions apply to all plans subject to ERISA.  However, the Joint Notice states that the Department of Health and Human Services “concurs” with the relief and will essentially adopt a non-enforcement policy to extend similar timeframes to non-Federal governmental group health plans and health insurance issuers offering coverage in connection with a group health plan.

Each of these extensions and related plan sponsor actions and considerations are discussed below.

HIPAA Special Enrollment Extension

The Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) requires group health plans to provide special enrollment opportunities to employees and their dependents when (i) such individuals lose eligibility for other health plan coverage in which they were previously enrolled, (ii) such individuals become eligible for a state premium assistance subsidy, or (iii) an eligible employee acquires a dependent through birth, marriage, adoption, or placement for adoption. In general, special enrollment is permitted if requested within 30 days of the triggering event (or 60 days if the change in eligibility arises under the Children’s Health Insurance Program). Under the Joint Notice, the Outbreak Period is disregarded for purposes of calculating these 30-day and 60-day HIPAA special enrollment timeframes.

In light of this change, employers will need to work with their third-party administrators and insurance carriers to ensure that these new special enrollment rules are implemented for the duration of the Outbreak Period, which could require retroactive coverage as far back as March 1. Also, because the extension applies to periods starting March 1, employers should review plan records to identify employees or dependents whose special enrollment requests were denied as untimely at any time starting on or after March 1, 2020. In addition, employers will want to consider whether and how to communicate these extensions to employees.

COBRA Election Notice Extension

The Joint Notice suspends the deadline for a plan administrator to provide a COBRA election notice to qualified beneficiaries during the Outbreak Period.  This notice period, which is generally 14 days from the date the plan administrator receives the notice of qualifying event (or 44 days from a qualifying event, where the employer is the plan administrator) will start to run again when the Outbreak Period ends.

This means that plan administrators are not required to provide the COBRA election notice during the Outbreak Period. As a practical matter, however, plan administrators likely will want to timely provide election notices to encourage qualified beneficiaries to timely elect and pay for COBRA coverage. 

COBRA Election Deadline Extension

Normally, an employee and/or their dependent who has a COBRA qualifying event has 60 days from the date group health plan coverage terminates (or, if later, 60 days after the date of their COBRA election notice) to elect COBRA continuation coverage. The Joint Notice extends this 60-day election period by disregarding the Outbreak Period.

This extension raises two considerations for employers.  First, the extension may result in the plan having to provide retroactive COBRA coverage for many months, which may result in adverse selection if individuals wait to see if they incur claims before electing COBRA.  Note, though, that individuals who retroactively elect COBRA coverage within the Outbreak Period will be required to pay the applicable COBRA premium for the entire period of coverage.

Second, the Joint Notice does not address whether the content of COBRA notices must be revised to reflect the extended deadlines.  Two days after the Joint Notice was issued, the DOL separately issued updated model COBRA notices, but these new model notices do not address the extensions set forth in the Joint Notice. In light of recent litigation related to insufficient COBRA election notices and the potential for steep penalties for noncompliance, employers should review their current COBRA notices, and/or coordinate with their third party COBRA administrators, to ensure the notices contain all of the details provided in the DOL’s recent model notices. In addition, to the extent COBRA notices are issued during the Outbreak Period, employers and plan administrators may want to include information in the notice packet regarding the extensions of time for election of COBRA coverage and remittance of COBRA premiums (discussed further below).

COBRA Premium Payment Period Extension

The COBRA rules provide that a qualified beneficiary has 45 days to make their initial COBRA premium payment once they have elected COBRA coverage. Subsequent COBRA payments must be made within the 30-day grace period that starts at the beginning of each coverage month. The Joint Notice extends these 45- and 30-day premium payment deadlines by disregarding the Outbreak Period, meaning that as of March 1, 2020 and through the end of the Outbreak Period, COBRA participants are not required to pay COBRA premiums. 

This extension may result in some COBRA participants waiting to pay for coverage until the Outbreak Period ends, making it difficult for employers to collect the accumulated back premiums payments from participants. The Joint Notice also contemplates that participants may make partial payments of premiums (e.g., for 2 out of 4 months) resulting in retroactive terminations of coverage mid-way through the Outbreak Period, which could be complicated administratively. 

COBRA Qualifying Event and Disability Notice Extension

Under the COBRA rules, a qualified beneficiary is required to notify a group health plan within 60 days of (i) divorce or legal separation, (ii) a dependent child losing dependent eligibility under the plan, or (iii) a disability determination.  The Joint Notice extends this 60-day timeframe through the end of the Outbreak Period, meaning that a qualified beneficiary has no obligation to notify the plan of a qualifying event or disability determination until the end of the Outbreak Period.

As with the other COBRA relief provisions described above, plan sponsors should coordinate with their COBRA administrators to ensure that appropriate practices, systems and documentation are in place to deal with this relief.

ERISA Benefit Claims Filing Extension

Under ERISA and the DOL claims procedure rules, group health plans must establish and maintain procedures governing the filing and initial disposition of benefit claims, and provide claimants with a reasonable opportunity to appeal an adverse benefit determination. In particular, group health plans and other welfare benefit plans must provide a deadline by which participants may file a benefit claim (set forth under the terms of the plan) and 180-day (for group health plans or disability benefits) or 60-day (for other welfare benefit plans) deadlines for appealing an adverse benefit determination.  The Joint Notice extends the benefits claims and appeals deadlines by disregarding the Outbreak Period.

This change means that the normal deadlines to file claims or appeals are tolled until the end of the Outbreak Period.  Upon the expiration of the Outbreak Period, the time periods for submitting claims and appeals that were in effect before March 1 will resume, which means that each individual situation will need to be considered to determine the deadline after the Outbreak Period. This extension is particularly notable for health flexible spending accounts (“FSAs”) and health reimbursement arrangements (“HRAs”) that have run-out periods. Since the Outbreak Period began on March 1, 2020, and many health FSAs and HRAs have March or April deadlines for submitting prior-year expenses for reimbursement, for such plans the Joint Notice appears to require an extension until 60 days after the Outbreak Period ends to submit expenses for reimbursement for the 2019 plan year.

External Review Process Extension for Group Health Plans

In general, once participants have exhausted their group health plan’s claims and appeals procedures, they have the right to request an external review (i.e., a review of the ERISA group health plan’s denial by an independent party) within four months after the date of receipt of a claim denial or final internal claim denial if the claim involves medical judgment or a rescission of plan coverage. Under the Joint Notice, the date within which ERISA group health plan claimants have to file a request for external review has been extended by disregarding the Outbreak Period.

In addition, the Joint Notice also extends the deadline for a participant to “perfect” their external review request.  Generally, participants must perfect their request within the four-month filing period (or if later, within the 48-hour period following the participant’s receipt of the plan’s notification that the participant’s request is not complete). The Joint Notice extends the period that a claimant has to file information to perfect their request for external review by disregarding the Outbreak Period.

Key Takeaways

While this new guidance may provide relief to both plan sponsors and plan participants, it also poses significant administrative burdens that may be costly and complicated for employers and plan administrators to implement. In particular, even though the agency guidance does not explicitly require the applicable notice and other materials to be updated to reflect these temporary changes, in the absence of further guidance employers and plan administrators may want to supplement or modify in some fashion adverse benefit determination notices, special enrollment notices, SPDs, and COBRA notices during the Outbreak Period to reflect these extensions.     

Please contact our Employee Benefits and Executive Compensation attorneys listed above for assistance in understanding and implementing any of these changes.