On May 4, 2020, the Department of Labor (DOL) and the Internal Revenue Service (IRS) (collectively, the “Agencies”) published the Extension of Certain Timeframes for Employee Benefit Plans, Participants and Beneficiaries Affected by the COVID–19 Outbreak (i.e., “COVID-19 Extensions”) in the Federal Register. These COVID-19 Extensions apply to plans regulated by ERISA such as group health plans, disability and other welfare plans, pension plans, and participants and beneficiaries of such plans during the COVID-19 National Emergency. Typically, self-insured plans are regulated by ERISA.

The Department of Health and Human Services (HHS) has advised the Agencies that HHS encourages sponsors of non-Federal governmental group health plans/insurers to provide similar relief to participants and beneficiaries. HHS further encourages state insurance departments to require and enforce similar COVID-19 Extensions for the group health insurer operating in their state.

In addition, the DOL issued EBSA Disaster Relief Notice 2020-01 to provide relief from the failure to timely provide notices, disclosures, or documents over which the DOL has interpretive and regulatory authority. However, this additional relief does not apply to the notices and disclosures already extended by the COVID-19 Extensions.

CHEIRON OBSERVATION: In general, the timeframe extensions for participants and beneficiaries are mandatory for plans subject to ERISA. As explained below, the extensions will have a substantial impact on plan administration.

Action Needed: Plan sponsors should review their communications and operating procedures for administration to determine what changes are needed to comply with the extended timeframes.

Background

Section 518¹ of the Employee Retirement Income Security Act of 1974 (ERISA), as amended, and section 7508A(b) of the Internal Revenue Code of 1986 (the “Code”) provide the Agencies authority to extend certain timeframes otherwise applicable to group health plans, disability plans, and other welfare plans (and pension plans) for a period of up to one year on account of a Presidentially declared disaster. In extending the timeframes, the Agencies are exercising their authority under these sections.

• Overview of Extension of Timeframes:

The COVID-19 Extensions notice requires that all group health plans, disability and other employee welfare benefit plans subject to ERISA or the Code must disregard the period from March 1, 2020 until sixty (60) days after the announced end of the COVID-19 National Emergency or such other date announced by the Agencies (“Outbreak Period”)² in applying timeframes for certain actions by plan participants, beneficiaries, qualified beneficiaries, or claimants. To the extent the actions (such as claiming benefits) also apply to pension plans, the extended timeframes also apply.

• Extension for Plan Participants, Beneficiaries, Etc.

If the following occur during, or would end during, the Outbreak Period, then participants, beneficiaries and claimants have extended timeframes:

• • • The 60-day election period for COBRA continuation coverage,
    • The date for making COBRA premium payments,
    • The 30-day period (or 60-day period, if applicable) to request special enrollment (such as adding dependents due to marriage, birth, or adoption),
    • The date for individuals to notify the plan of a qualifying event or determination of disability,
    • The date within which individuals may file a benefit claim under the plan’s claims procedure,
    • The date within which claimants may file an appeal of an adverse benefit determination,
    • 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, and
    • 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.

The chart below compares the normal rules to the new extensions.  

• Extension for Group Health Plans

With respect to group health plans and their sponsors and administrators, the Outbreak Period shall be disregarded when determining the date for providing a COBRA election notice giving the group health plan 74 days (104 days if the employer is also the plan administrator) after the National Emergency to send the COBRA election notice. If the notice is sent 60 (or more) days after the National Emergency ends, then the participants would only have the normal 60 days after receiving the notice to elect COBRA.

CHEIRON OBSERVATIONS: The extension of timeframes has a substantial impact on the administration of group health plans. In essence, the Agencies are requiring that plans either “stop the clock” (for periods that were running), or delay the “start of the clock” (for periods that would otherwise start) during the Outbreak Period. At the moment we do not know the ending point for the National Emergency. Thus, plans face the prospect of participants and beneficiaries claiming benefits, making COBRA elections, or filing appeals for many months after the period which otherwise would have expired.

The COVID-19 Extension contains a number of helpful examples that illustrate the application of the extensions, which are at the end of the notice (see above link).

The COVID-19 Extensions could impact contracts between health care providers and network managers/insurers as enrollments could be retroactively adjusted for more than the industry standard 60-day or even six-months typically allowed in a standard Plan sponsor-Network Manager contract. In addition, some insurers, plans, and even provider contracts have claim filing deadlines that arguably will have to be adjusted.

The extension of timeframes is likely to increase plan costs (both for administration and claims payments). In particular, the extension of time with respect to the election of COBRA coverage increases the opportunity for adverse selection as qualified beneficiaries can wait until after they have a need for care to determine if they want to elect COBRA coverage.

• Relief For Notices - Good Faith Compliance

Under EBSA Disaster Relief Notice 2020-01, an employee benefit plan and the responsible plan fiduciary will not be in violation of ERISA for a failure to timely furnish a notice, disclosure, or document that must be furnished between Outbreak Period, if the plan and responsible fiduciary act in good faith and furnish the notice, disclosure, or document as soon as administratively practicable under the circumstances. Good faith acts include use of electronic alternative means of communicating with plan 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.

EBSA Disaster Relief Notice 2020-01 also advises plan fiduciaries to make reasonable accommodations for participants and beneficiaries to prevent the loss of benefits or undue delay in benefits payments and to attempt to minimize the possibility of individuals losing benefits because of a failure to comply with pre-established timeframes. See the heading “General ERISA Fiduciary Compliance Guidance” at the end of the notice.

CHEIRON OBSERVATIONS: The relief for failing to timely furnish notices is a non-enforcement of the law if there was a good faith effort to timely furnish notices, etc. The DOL view that good faith includes electronic disclosure through email, text messaging, and access to websites is a significant relaxation of their prior views on the use of electronic disclosures.

If you have any questions about these timeframes, please contact your Cheiron consultant.

 Cheiron is an actuarial consulting firm that provides actuarial and consulting advice. However, we are neither attorneys nor accountants. Accordingly, we do not provide legal services or tax advice.

¹    Section 518 was amended by the CARES Act to include public health emergencies as a disaster to which that section applied.

²    For example, if the National Emergency ends on May 31, 2020 then the Outbreak Period would end on July 30, 2020 (the 60th day after the end of the National Emergency).