New guidance issued by the Department of Labor, Internal Revenue Service, and Health and Human Services requires group health plans to disregard certain timeframes and deadlines related to: (a) special enrollment, (b) COBRA elections and premium payments, (c) claims procedures and (d) external claims review during what is being referred to as the “outbreak period,” which began March 1, 2020, and will continue through 60 days after the end of the COVID-19 National Emergency. Separate guidance from the Department of Labor offers both health and retirement plans relief from deadlines for providing certain participant-level notices and disclosures, authorizing and implementing plan loans and distributions, and making participant contributions to a plan. Lastly, the IRS has issued guidance offering flexibility with respect to mid-year elections for cafeteria plans for the remainder of the 2020 calendar year, as well as grace periods for both health Flexible Spending Arrangements (“health FSAs”) and dependent care assistance programs (“DCAPs”).
Group Health Plans Should Start Taking Action Now for the Required Changes
As a result of the retroactivity of the guidance, plan sponsors will need to coordinate with their internal and external health plan administration teams and vendors to understand the affected timeframes and deadlines so they can be correctly administered and communicated to employees. The periods and dates that must be extended include the following:
- The date for making COBRA elections and COBRA premium payments
- The date for individuals to notify the plan of a qualifying HIPAA special enrollment event (e.g., birth, adoption, marriage, etc.) or determination of disability
- The date within which individuals may file a benefit claim under the plan’s claims procedures
- The date within which claimants may file an appeal of an adverse benefit determination under the plan’s claims procedures
- The date within which claimants may file a request for an external review after receipt of an adverse benefit determination or final internal adverse benefit determination
- The date within which a claimant may file information to perfect a request for external review upon a finding that the request was not complete
Although at this time it does not appear that any plan amendment is expressly required by this new guidance, future guidance might be issued that requires an amendment. Moreover, regardless of any official guidance, employers may still want to amend their plan documents to ensure that the plan operates in compliance with its written terms.
Examine Group Health Plan Administration for the Last Two Months
Due to the fact that this guidance came out at the end of April, but it reaches back to March 1, 2020, group health plans must examine their prior plan administration and adjust any affected participants. For example, it will be important to see if any COBRA participants were dropped from coverage due to late payments after March 1, 2020, or if anyone was denied COBRA coverage for turning in their COBRA election past the deadline. Also, since this new guidance applies to initial claims for reimbursement under health FSAs and health reimbursement arrangements (but not dependent care FSAs) as these plans are considered “group health plans” under the Code and ERISA, and all run-out periods that had not yet expired as of March 1, 2020, must be extended, and reimbursement requests denied due to tardiness should be re-visited.
Make Adjustments for Future Group Health Plan Administration
Going forward, plan administration must be adjusted as well. For example, employers cannot remove anyone from COBRA coverage for failure to pay premiums and must allow anyone whose COBRA election period did not expire before March 1, 2020 to elect COBRA through a date not yet announced (i.e. 60 days after the end of the COVID-19 National Emergency).
Silver Lining for all Employee Benefit Plans
In addition to the new guidance addressed above, the Department of Labor concurrently issued relief that provides some flexibility to sponsors of group health plans and retirement plans, while at the same time indicating that the Department will be relaxing certain enforcement efforts during the COVID-19 pandemic. Specifically, the time period for plans to furnish ERISA-required notifications, including SPDs, SMMs, and benefit determinations, has been extended so long as there is a good faith effort made by the plan sponsor to furnish the documents when administratively practicable. Further, there is some relief for authorizing plan loans and distributions in “good faith” and any retroactive plan amendments related to those changes discussed in our prior newsletter. The Department of Labor also provided limited from its otherwise stringent timing rules related to the funding of participant contributions to a plan, if the failure to meet those timing rules is related to COVID-19. Notably, there was no further extension of the annual Form 5500 deadline.
Cafeteria plans have also been offered some flexibility clarifying that (i) (under certain circumstances), a plan may permit certain mid-year enrollment changes as a result of COVID-19 (outside of the general cafeteria plan mid-year enrollment rules); (ii) grace periods may be extended for both health FSAs and DCAPs through the end of the 2020 calendar year; and (iii) the limit for unused health FSA carryover amounts increased from $500, to a maximum of $550, as adjusted annually for inflation. Further, high deductible health plans have some relief to cover expenses related to COVID-19, as well as a temporary exemption for telehealth services to be provided without a deductible, retroactively to January 1, 2020. Importantly, unlike the previous guidance issued jointly by the IRS, DOL, and HHS, this new guidance is completely optional for employers. However, should an employer choose to implement any of this cafeteria plan relief, a formal plan amendment is required by later than December 31, 2021.
If you have questions or would like more detailed information, our employee benefits team can assist in understanding the administration implications and help prepare participant communications. At a minimum, plan sponsors might consider sharing the DOL’s new FAQ’s with participants, as they cover much of these new changes for both health and retirement plans.
Here are the links to the guidance referenced above: DOL / IRS Final Rule on Relief (in conjunction with HHS); EBSA Disaster Relief Notice 2020-01; DOL COVID-19 FAQs for Participants and Beneficiaries; and IRS Notices 2020-29 and 2020-33.