On April 28, 2020, the DOL and IRS released an advanced copy of a final rule extending various deadlines applicable to employee benefit plans to take into account the disruption caused by the COVID-19 emergency. [The official version of this final rule is scheduled to be published in the Federal Register on May 4th and may include minor variations from the advanced copy.] In addition, the DOL also released EBSA Disaster Relief Notice 2020-01 (“Notice 2020-01”) addressing the extension of deadlines for the provision of various ERISA-required notices and disclosures by plan administrators. The new rule and Notice 2020-01 impact the administration of potentially all employee benefit plans. This Alert describes the specific deadlines impacted by the new rule and Notice 2020-01.
| Note Regarding Governmental Plans. Group health plans sponsored by governmental employers are generally not subject to the provisions of ERISA and the Internal Revenue Code (the “Code”) imposing the deadlines impacted by the rule and, as a result, the rule is not directly applicable to such plans. However, HHS has informed the DOL and IRS that it “will exercise enforcement discretion to adopt a temporary policy of measured enforcement to extend similar deadlines applicable” to governmental group health plans and their participants under applicable provisions of the Public Health Service Act (“PHSA”). HHS also encourages plan sponsors of governmental group health plans to provide relief to participants and beneficiaries similar to that specified in the rule issued by the DOL and IRS. |
DOL and IRS Rule. In general, under the new rule, the benefit plan deadlines identified below are extended by disregarding an “Outbreak Period.” In other words, the running of the time periods discussed below is tolled until expiration of the Outbreak Period.
| Outbreak Period. The “Outbreak Period” is defined as the period of time beginning on March 1, 2020, and ending sixty (60) days after the end of the COVID-19 National Emergency (which has not yet been announced) or such other date announced by the DOL and IRS in a future notice. The “COVID-19 National Emergency” consists of the Proclamation on Declaring a National Emergency Concerning the Novel Coronavirus Disease (COVID-19) Outbreak and the determination, under section 501(b) of the Robert T. Stafford Disaster Relief and Emergency Assistance Act, 42 U.S.C. 5121 et seq., that a national emergency exists nationwide beginning March 1, 2020, as the result of the COVID-19 outbreak, which were issued by President Trump issued on March 13, 2020. |
The rule extends the following deadlines applicable to employee benefit plans:
- Deadline for Requesting HIPAA Special Enrollment. The deadline by which participants and eligible employees must request HIPAA special enrollment in a group health plan (other than a plan that is an excepted benefit) is extended.
- Deadline for Providing a COBRA Election Notice. The deadline by which a plan administrator must distribute a COBRA election notice to qualified beneficiaries after a COBRA qualifying event is extended.
- COBRA Election Period. The deadline by which a qualified beneficiary must elect COBRA continuation coverage (generally 60 days from the date of the election notice) is extended.
- Deadline for Payment of COBRA Premiums. The deadlines by which qualified beneficiaries must pay COBRA premiums (both the initial COBRA premium and subsequent monthly COBRA premiums) are extended.
- Deadline for Notifying Plan Administrator of a COBRA Qualifying Event or Disability Determination. The deadlines by which qualified beneficiaries must notify a plan of a qualifying event (e.g., divorce), a second qualifying event, and a determination by the Social Security Administration that the qualified beneficiary is disabled are extended.
- Deadline for Filing a Benefit Claim. The deadlines applicable under a plan’s claims procedures for filing claims for benefits are extended.
- Note, the application of the regulation to plans that use a claim run-out period following the end of the plan year (i.e., most FSAs and HRA) is unclear. If the claim run-out period expired during the Outbreak Period then the claim run-out period presumably is extended by the new rule (e.g., the claim run-out period will expire a certain number of days following expiration of the Outbreak Period depending on the number of days remaining in the run-out period on March 1, 2020). However, assuming the Outbreak Period ends during the 2020 plan year, it is not clear whether the rule will require an extension of the claim run-out period occurring after the close of the 2020 plan year.
- Deadline for Appealing an Adverse Benefit Determination. The deadlines applicable under a plan’s claims procedures for appealing adverse benefit determinations are extended.
- Deadline for Requesting External Review and Filing Information to Perfect and External Review. To the extent the external review requirements apply to the plan, the deadlines for filing a request for an external review following an adverse benefit determination or a final internal adverse benefit determination and the deadline during which a claimant may file information to perfect a request for external review are extended.
| Example: If the Outbreak Period were to expire on June 29, 2020, the extension of the HIPAA special enrollment deadline would work as follows. If an employee gave birth on March 31, 2020, and would like to enroll herself and the child into her employer’s plan, the employee may exercise her special enrollment rights until 30 days after June 29, 2020 (assuming the employer’s plan imposes a 30-day deadline following birth to request special enrollment and provided that she pays the premiums for the retroactive period of coverage). The period of time starting on the birth date (which occurs within the Outbreak Period) and ending on the last day of the Outbreak Period is disregarded for purpose of applying the deadline contained in the plan by which special enrollment must be requested. |
The new rule includes a number of additional examples demonstrating the manner in which the Outbreak Period is disregarded, thereby extending the deadline during which certain actions must be taken by plan administrators and plan participants and beneficiaries.
Notice 2020-01. Under Notice 2020-01, the DOL extended the deadlines for furnishing certain other required notices or disclosures to plan participants and beneficiaries. The extension provided in Notice 2020-01 generally applies with respect to the distribution of any notices, disclosures, and other documents required by Title I of ERISA other than those notices addressed in the new rule addressed above. Examples of the types of notices and disclosures governed by Notice 2020-01 would include Summary Plan Descriptions, Summaries of Material Modification, notices of adverse benefit determinations, and the like.
As a result of this relief, employee benefit plans and plan fiduciaries will not be in violation of ERISA for a failure to timely furnish a notice, disclosure, or document that must be furnished during the Outbreak Period so long as they act in good faith and furnish the notice, disclosure, or document as soon as administratively practicable under the circumstances. Notice 2020-01 clarifies that good faith action includes the use of electronic communications (e.g., email, text messages, and continuous access websites) to provide notices, disclosures, and documents to participants and beneficiaries who the fiduciary reasonably believes have effective access to the electronic communication.
Action Items: To ensure compliance with deadlines imposed under ERISA, the Code, and/or the PHSA as extended under this new guidance, plan sponsors should take the following actions:
- Monitor future developments to determine when the Outbreak Period ends. Until the President declares an end to the COVID-19 National Emergency or the DOL and IRS issue a notice announcing an end of the Outbreak Period, we are unable to determine the date on which any of the deadlines mentioned above will expire.
- Notify plan participants of extended deadlines. Although the new rule does not address this issue, the changes required by the new rule generally constitute a material modification to the terms and conditions of the plan. Plans subject to ERISA are required to notify participants of such material modifications.
- Consider adopting formal plan amendments incorporating the new deadlines. Although plans are required to provide the extensions contained in the new rule regardless of whether they are included in the governing plan document and the rule does not specifically require plan amendments, ERISA generally requires these deadlines to be reflected in the plan document.
- Modify COBRA notices to describe the extended deadlines.
- Adjust administrative practices to take into account the extended deadlines.
Please contact us if you have any questions and/or would like assistance with implementing any of the forgoing action items.