Ice Miller LLP: Insights

A Closer Look: Extended Deadlines

Return to Summary Table of COVID-19 Legislation for Employer-Based Retirement and Welfare Plans

This Closer Look includes a summary of guidance we have received as of the date of publication that allows for deadline extensions applicable to employee benefit plans, or otherwise requires employee benefit plans to disregard periods related to the COVID-19 national emergency when determining applicable timeframes.

BACKGROUND

On March 13, 2020, President Trump declared a national emergency related to COVID-19 and separately determined that, under Section 501(b) of the Robert T. Stafford Disaster Relief and Emergency Assistance Act, a national emergency existed beginning March 1, 2020.

IRC § 7508A and ERISA § 518 authorize the Secretaries of the Treasury and Labor, respectively, to postpone by up to one year the application of any deadline under the Internal Revenue Code or ERISA in the case of a federally declared disaster or a terroristic or military action. The relief granted by the regulatory agencies to employee benefit plans and participants as described below is pursuant to this authority.

IRS NOTICE 2020-23

On April 9, 2020, the Internal Revenue Service (IRS) issued Notice 2020-23 to extend deadlines for numerous "time-sensitive actions" due to be performed on or after April 1, 2020 and before July 15, 2020. Under authority pursuant to IRC § 7508A, the Secretary of the Treasury determined that any person (defined to include any individual, trust, estate, partnership, association, company, and corporation) with a specified time-sensitive action due to be performed during the time period of April 1, 2020 to July 15, 2020 is affected by the COVID-19 emergency, and is therefore eligible for the relief described in Notice 2020-23.

The relief automatically postpones until July 15 the deadline for any of the time-sensitive actions outlined below that were due to be performed on or after April 1, 2020 and before July 15, 2020.

Time-Sensitive Actions

Notice 2020-23 extends relief to two classes of "time-sensitive actions" described in other IRS guidance. The first class relates to certain court deadlines related to tax claims. The second class incorporates the time-sensitive actions listed in Revenue Procedure 2018-58, an extensive document that lists the acts that the IRS may postpone in the event of a federally declared disaster.

Revenue Procedure 2018-58 specifically identifies 44 different employee benefits time-sensitive actions the IRS may postpone in the event of a federally declared disaster. Listed here are several (but not all) of the time-sensitive actions postponed until July 15, 2020 under Notice 2020-23 for employee benefit plans:

Loan repayments to qualified employer plans;
Contributions to IRAs to be considered contributed in the prior taxable year;
Furnishing IRA contribution information to the owner and filing Form 5498 with the IRS;
Furnishing HSA contribution information to the beneficiary and filing Form 5498-SA with the IRS;
Year-end forfeiture of unused amounts elected under a cafeteria plan;
Elections by a qualified participant in an ESOP to direct the plan's investment of at least 25% of his or her account;
Distribution of excess deferrals and related income and excess aggregate contributions and related income;
60-day rollovers of eligible rollover distributions to eligible retirement plans, including IRAs;
Rollovers of qualified plan loan offsets to eligible retirement plans;
An ESOP's distribution of dividends on stock of a C corporation to participants and beneficiaries;
Elections of permissible withdrawals from an eligible automatic contribution arrangement;
Distribution of nondeductible contributions to a qualified employer plan to avoid a 10% tax;
Distribution of excess contributions to an IRA or certain other tax-favored accounts to avoid a 6% tax;
Filing Form 5500, Form 5500-SF, Form 5500-EZ, and Form 8955-SSA; and
Correction periods for self-correction of operational failures under the Employee Plans Compliance Resolution System (EPCRS).

Interest and Penalties Suspended

As a result of the postponement of the deadline for time-sensitive actions, the period beginning on April 1, 2020, and ending on July 15, 2020, will be disregarded in the calculation of any interest, penalty, or addition to tax for failure to file the specified forms or to pay the specified payments postponed by Notice 2020-23.

Relief for Participants

Several of the time-sensitive actions outlined above provide relief to plan sponsors and administrators of retirement plans and welfare benefit plans. Plan sponsors and administrators should be aware of this relief to understand when they have additional time to complete certain plan actions and related tax filings.

Notice 2020-23 also provides specific relief to participants. Plan administrators should be prepared to respond to participant requests for eligible relief and to process otherwise "late" actions that are permitted by this guidance. This includes:

Requests to suspend loan payments until July 15, 2020. This is an optional decision for the participant that applies regardless of whether the participant qualifies for the loan relief provided under the CARES Act, and regardless of whether the plan has adopted the CARES Act loan provisions. If a participant chooses to delay his or her payment during this period, the plan must suspend payments by payroll deduction (if applicable) and may not treat the loan as in default due to the missed payments. In addition, interest should not accrue during the suspension of payments. The suspension of interest accrual would appear to apply equally to qualified individuals who elect to suspend their loan payments under the CARES Act relief, through July 15, 2020.
Requests to complete rollover contributions after the 60-day deadline. Individuals whose 60-day deadline to complete a rollover contribution expires on or after April 1, 2020 and before July 15, 2020 will have until July 15, 2020 to complete the rollover.
Cafeteria plan extensions for non-calendar year plans. A cafeteria plan with a plan year beginning on April 1, May 1, June 1, or July 1 can allow employees to make new elections until July 15, 2020, even in the absence of a change in status event. In addition, FSA participants should be permitted until July 15, 2020 to incur qualified medical expenses without forfeiture if the plan year ends during this period. New hires during this period may have until July 15, 2020 to make elections.
IRA contributions. Employers that sponsor deemed IRA programs in their plans can accept IRA contributions designated for the 2019 plan year through July 15, 2020.

IRS AND EBSA JOINT NOTICE

On May 4, 2020, the Employee Benefits Security Administration (EBSA) in the Department of Labor (DOL) and the IRS filed a Joint Notice to extend numerous deadlines applicable to retirement and health plans subject to ERISA and the Internal Revenue Code. The Department of Health and Human Services (HHS), which has jurisdiction over non-federal governmental health plans and insurance issuers, concurred in the relief provided by the Joint Notice. HHS intends to offer similar relief for governmental plans and encourages governmental plans, states, and issuers to act in a manner consistent with the Joint Notice.

Applicable Plans

The Joint Notice encompasses all of the following plans:

Group health plans;
Disability plans;
Other employee welfare benefit plans; and
Employee pension benefit plans (both defined contribution and defined benefit plans).

Overview of Relief Provided

The Joint Notice requires applicable plans to disregard the period beginning March 1, 2020 and ending 60 days after the COVID-19 national emergency terminates (referred to as the "Outbreak Period") in determining deadlines for:

Enrolling in the plan upon a special enrollment event;
Electing COBRA continuation coverage;
Making COBRA premium payments;
Notifying the plan of a COBRA qualifying event or determination of disability;
Filing an initial benefit claim;
Filing an appeal of an adverse benefit determination; and
Requesting an external review after receipt of a final adverse benefit determination (and perfecting such request).

In addition, with respect to group health plans and their sponsors and administrators, the Outbreak Period is disregarded when determining the date for providing a COBRA election notice.

To the extent there are different Outbreak Period end dates for different parts of the country, EBSA and the IRS will issue additional guidance regarding the application of this relief.

Special Enrollment Periods

General Rule. ERISA § 701(f) and IRC § 9801(f) specify various events that qualify an individual for a mid-year special enrollment period under a health plan, including loss of other coverage, termination of Medicaid or CHIP coverage, and having or becoming a new dependent. Qualifying individuals may request enrollment within 30 days or 60 days, as applicable, of the qualifying event.

Example. Employee does not participate in Employer's group health plan. Employee gives birth on March 31, 2020 and would like to enroll herself and the child in Employer's plan. Assume the Outbreak Period ends on July 28, 2020. Employee may exercise her special enrollment rights until 30 days after July 28, 2020, or by August 27, 2020.

Implications. In the example above, the plan must permit the employee to elect coverage for herself and her child retroactively to the date of birth, provided that all required premiums are paid by August 27, 2020. For special enrollment events that are not related to the birth or adoption of a child, such as special enrollment due to a loss of other coverage, an employee is entitled to elect coverage that is effective no later than the first day of the first calendar month beginning after the date the plan or issuer receives the request for special enrollment. In that case, the employee's extended enrollment right would not provide the employee with retroactive coverage.
Individuals whose special enrollment event occurred as early as February 2020 (or January 2020 in the case of a Medicaid or CHIP special enrollment event) may still have additional time to enroll in coverage, after disregarding the Outbreak Period. If an employee was previously denied enrollment due to missing a deadline that has been extended by the Joint Notice, the employee must be notified of his or her additional time to enroll and when such coverage will be effective. In addition, all employees should be notified of this extension since some employees may have failed to come forward because they assumed that they missed their opportunity to enroll under the plan's existing terms.

COBRA Election Periods

General Rule. ERISA § 605 and IRC § 4980B(f)(5) require that group health plans allow qualified beneficiaries to elect continuation coverage within an "election period," which begins by the date coverage terminates due to the qualifying event, is at least 60 days long, and ends, generally, at least 60 days after the date coverage terminates.

Example. Employee's hours are reduced due to COVID-19. Employee becomes ineligible for Employer's group health plan as of April 1, 2020. Employer provides Employee a COBRA election notice on April 1, 2020. Assume the Outbreak Period ends on July 28, 2020. Employee may elect COBRA coverage within 60 days of July 28, 2020, or by September 26, 2020. If COBRA coverage is elected and premiums are timely paid by the qualified beneficiary, the COBRA coverage will be retroactive to April 1, 2020.

Considerations. Individuals who received a COBRA election notice as early as January 2020 may still have additional time to elect COBRA coverage, after disregarding the Outbreak Period. If an employee (including a former employee) was previously denied COBRA coverage due to missing a deadline that has been extended by the Joint Notice, the employee must be notified of his or her additional time to elect COBRA.

COBRA Premium Payment Deadlines

General Rule. ERISA § 606(2)(C) and (3) and IRC § 4980B(f)(2)(B)(iii) and (C) require, generally, that premiums for COBRA coverage be paid within 30 days of the date due.

Example. Former Employee elected COBRA coverage on January 1, 2020. Premiums are due by the first of the month, and no later than the statutory 30-day grace period. Beginning in March, Former Employee fails to pay the premium every month during the Outbreak Period. Assume the Outbreak Period ends on July 28, 2020. As of August 1, 2020, Former Employee has made no premium payments during the Outbreak Period.

Premiums for March through July that are paid within 30 days after July 28, 2020, or by August 27, 2020, are timely. Former Employee is entitled to COBRA coverage for all of these months if he makes payment. The premium for August is due by August 31, 2020 (the 30-day grace period applicable to August's payment).

If Former Employee pays only two months' premiums by August 27, 2020, he is entitled to COBRA for March and April only and the plan is entitled to cancel his COBRA coverage as of May 1, 2020.

Considerations. Individuals whose COBRA continuation coverage was previously terminated due to a failure to timely pay premiums may need to have their coverage reinstated to the extent that payments are not treated late after disregarding the Outbreak Period. Plan sponsors should confirm with their COBRA administrators that COBRA terminations are not occurring due to a failure to receive timely payment during the Outbreak Period and that processes are in place to process and pay claims if payment is received at the end of the Outbreak Period.

COBRA Notice of Qualifying Event

General Rule. ERISA § 606(a)(3) and IRC § 4980B(f)(6)(C) require that each covered employee or qualified beneficiary notify the plan administrator of certain qualifying events (divorce, loss of dependent status, and being determined to be disabled by Social Security) generally within 60 days of the date of the qualifying event.

Example. Employee and Spouse divorce on April 1, 2020. Normally, Spouse has 60 days to notify the plan administrator of the divorce in order to claim a right to COBRA continuation coverage. Assume the Outbreak Period ends on July 28, 2020. Spouse must notify the plan administrator of the divorce within 60 days of July 28, 2020, or by September 26, 2020.

Considerations. Individuals who experienced a COBRA qualifying event as early as January 2020 may have additional time to notify the plan administrator of the qualifying event in order to elect COBRA continuation coverage. Because the plan administrator may not be aware of the potential employees impacted, all employees should be notified of this extension.

COBRA Election Notice Deadlines (Plan Administrator Relief)

General Rule. ERISA § 606(c) and IRC § 4980B(f)(6)(D) require plan administrators to notify qualified beneficiaries of their rights in the case of a qualifying event. Notification is generally required within 14 days of the date on which the plan administrator is notified.

Example. Employee's spouse notifies plan administrator of a divorce and seeks COBRA coverage on April 1, 2020. Assume the divorce is final on April 1, 2020. Normally, the plan administrator has 14 days to provide the spouse with a COBRA election notice. Assume the Outbreak Period ends on July 28, 2020. The plan administrator must provide the spouse with a COBRA election notice by August 11, 2020. If COBRA coverage is elected and premiums are timely paid by the spouse, the COBRA coverage will be retroactive to April 1.

Considerations. The other COBRA relief provided under the Joint Notice applies to participants and qualified beneficiaries. By contrast, this provision extends the time by which the plan administrator must provide a required notice to a qualified beneficiary. While this relief is certainly helpful for employers (or their COBRA administrators) that have experienced significant disruption in their business operations, employers and administrators should work in good faith to provide an election notice as soon as possible in an effort to minimize a loss of benefits to qualified beneficiaries.

Benefit Claims Deadlines

General Rule. A plan's claims procedure, subject to ERISA regulations, specifies the period in which an individual may file a benefit claim. This relief applies to all plans covered by the ERISA claims regulations, including, but not limited to, group health plans, disability plans, and retirement plans.

Example. Participant receives covered medical treatment on March 1, 2020, but does not submit her claim to the plan until April 1, 2021. The plan requires claims to be submitted within 365 days of treatment. Assume the Outbreak Period ends on July 28, 2020. Participant's claim is timely and may be submitted within 365 days of July 28, 2020, or by July 28, 2021.

Considerations. Beyond application of this claim filing extension to traditional group health plans and retirement plans, plan sponsors should be aware of the application of this relief to health and dependent care FSAs. Calendar year plans very often require FSA claims to be submitted within the first 90 days of the following calendar year in which the claim was incurred. For those plans, the deadline falls within the Outbreak Period, so the deadline to submit FSA claims in this circumstance is automatically extended until the Outbreak Period ends, plus any additional days left in the run-out period after the Outbreak Period began.

Appeals Deadlines

General Rule. A plan's claims procedure, subject to ERISA regulations, specifies the period in which an individual may appeal an adverse benefit determination. The minimum period is 60 days (or 180 days for group health plans) following receipt of a notification of the adverse determination. This relief applies to all plans covered by the ERISA claims regulations, including, but not limited to, group health plans, disability plans, and retirement plans.

Example. Participant received notice of an adverse benefit determination from his disability plan on January 28, 2020. The notice provides a 180-day period for appeal. Assume the Outbreak Period ends on July 28, 2020. Participant may file an appeal within 148 days (180 days – 32 days between January 28 and March 1) of July 28, 2020, or by December 23, 2020.

Considerations. Plan administrators and appeals committees must remember to disregard the Outbreak Period in reviewing plan appeals to determine if the procedural timing requirements have been met. If the plan administrator fails to strictly adhere to the plan's internal claims and appeals procedures (as modified by this relief), it may jeopardize the deferential standard of review afforded to plans under ERISA if the claim is ultimately challenged in court.

Deadlines for Requesting (and Perfecting Requests) for External Review

General Rule. ERISA and IRS regulations require non-grandfathered group health plans and insurers to allow claimants four months to request external review of an adverse benefit determination or final internal adverse benefit determination that is eligible for external review. Claimants who have filed an incomplete request for external review are permitted to perfect their claim within the later of the four-month period for requesting review or the 48-hour period following notification of the missing materials.

Considerations. The external review process is generally overseen by the plan's claims administrator and contracted independent review organizations (IROs). The plan administrator should confirm that the claims administrator and IROs will disregard the Outbreak Period in determining the timeframes applicable to external reviews.

Key Takeaways

We believe that plan administrators have a fiduciary duty to notify all employees of the extensions required by the Joint Notice. These extensions can have a significant impact on the ability of participants, beneficiaries, and claimants to effectively exercise their health coverage portability and continuation coverage rights and to file or perfect their benefit claims.

The Joint Notice does not address whether plans must be amended to reflect the temporary extension, which end date is not yet known (and which may be different in different regions of the country). Notwithstanding, we believe that, consistent with the aims of the Joint Notice and the good faith requirements outlined below with respect to EBSA guidance, plan sponsors should use their best efforts to communicate this relief to all employees in order to minimize the possibility of individuals losing benefits because of a failure to comply with certain pre-established timeframes.

EBSA DISASTER RELIEF NOTICE 2020-01

On April 28, 2020, the DOL issued EBSA Disaster Relief Notice 2020-01 to provide delays and other relief to health and retirement plans governed by ERISA. The Department of HHS, which has jurisdiction over non-federal governmental plans and insurance issuers, concurred in the relief provided by Notice 2020-01. HHS intends to adopt a policy of measured enforcement to extend similar timeframes to non-federal governmental group health plans and insurers. HHS encourages governmental group health plans and issuers to operate in a manner consistent with Notice 2020-01.

Overview of Relief Provided

Notice 2020-01 grants delays and other relief to health and retirement plans related to:

Notices, disclosures, and documents due under ERISA Title I during the national emergency;
Failures to follow verification procedures for plan loans and distributions;
Loans provided pursuant to the CARES Act;
Deadline for adopting loans and distributions permitted by the CARES Act;
Forwarding repayments of participant loans to a plan;
Blackout notices; and
Form 5500 and Form M-1 filings.

Deadlines for All Required Notices and Disclosures

Pursuant to Notice 2020-01, the DOL will not consider a plan or fiduciary in violation of ERISA for failing to furnish a notice, disclosure, or document that is required to be furnished by Title I of ERISA during the Outbreak Period if the plan and fiduciary act in good faith and furnish the notice, disclosure, or document as soon as administratively practicable under the circumstances.

The "Outbreak Period" is defined in the same way as it is defined for purposes of the Joint Notice discussed above, i.e., March 1, 2020 through 60 days after the national emergency is lifted. Acting in "good faith" includes using electronic alternative means of communication with plan participants and beneficiaries that the fiduciary reasonably believes have effective access to electronic means of communication. This includes electronic communication by means of email, text messages, and continuous access websites.

This relief applies to all notices, disclosures, and documents—other than those specifically encompassed by the Joint Notice—required to be furnished during the Outbreak Period under Title I of ERISA, including:

Blackout notice
Summary Plan Description
Summary of Material Modification
Summary Annual Report
Notification of Benefit Determination (Claims Notices and Explanation of Benefits)
Plan Document
Summary of Material Reduction in Covered Services or Benefit
Medical Child Support Order Notice
National Medical Support Notice
CHIPRA Notice
Wellness Program Disclosure
Newborns' Act Description of Rights
Michelle's Law Enrollment Notice
Women's Health and Cancer Rights Act Notice
MHPAEA Criteria for Medically Necessary Determination Notice
Summary of Benefits and Coverage
Summary of Benefits and Coverage Notice of Modification
Periodic Pension Benefit Statement
Statement of Accrued and Nonforfeitable Benefits
Suspension of Benefits Notice
DRO and QDRO Notices
Notice of Significant Reduction in Future Benefit Accruals
Section 404(c) Plan Disclosures
Qualified Default Investment Alternative Notice
Automatic Contribution Arrangement Notice
Annual Funding Notice
Plan and Investment Fee Disclosure
Plan Service Provider Disclosure

Verification Procedures for Plan Loans and Distributions

The DOL advises that it will not treat failures to follow a plan's verification procedures for loans or distributions during the Outbreak Period as failures if:

The failure is solely attributable to the COVID-19 outbreak;
The plan administrator makes a good-faith diligent effort to comply with the requirements; and
The plan administrator makes a reasonable attempt to correct procedural deficiencies as soon as practicable.

This relief does not extend to verification procedures related to spousal consent, if applicable, or other statutory or regulatory requirements under the jurisdiction of the Department of Treasury and IRS.

Plan Loans under the CARES Act

The DOL will not treat any person as having violated the provisions of Title I of ERISA solely for providing loans, or delaying repayment of loans, in accordance with Section 2202(b) of the CARES Act.

Deadline for Adopting Loans and Distributions Permitted by the CARES Act

ERISA plans may operate in accordance with the loan and distribution provisions of Section 2202 of the CARES Act prior to adopting an amendment, provided the amendment is adopted by the last day of the first plan year beginning on or after January 1, 2022. This deadline is consistent with the deadline imposed by the CARES Act and the IRS for amending plans for these provisions.

Deadline for Forwarding Participant Contributions and Loan Repayments to Plan

Under existing guidance, participant contributions and loan repayments are considered plan assets and must be forwarded to the plan on the earliest date that they can be reasonably segregated from general assets, and no later than the 15^th business day of the month in which paid to or withheld by the employer.

During the Outbreak Period, the DOL will not take enforcement action against a temporary delay in forwarding participant payments or contributions due solely to a failure attributable to COVID-19. Employers are advised to act reasonably, prudently, and in the interest of employees to forward the amounts as soon as administratively practicable.

Blackout Notices

Plan administrators of individual account plans generally must provide 30 days' advance notice to participants and beneficiaries whose rights under the plan will be temporarily suspended, limited, or restricted by a blackout period. The regulations provide an exception to the advance notice requirement when the inability to provide the notice is beyond the reasonable control of the plan administrator and a fiduciary so determines in writing. The DOL will not require the written documentation by a fiduciary pursuant to the regulation for blackout notices covered by Notice 2020-01, as pandemics are by definition beyond a plan administrator's control.

Form 5500 and Form M-1

The DOL is providing relief with regard to the Form 5500 and Form M-1 that is identical to the relief provided by the IRS with regard to the Form 5500 under IRS Notice 2020-23. With respect to Forms 5500 due prior to July 15, 2020, the IRS delayed the deadline for those Forms 5500 to July 15, 2020.

Key Takeaways
The DOL made clear in Notice 2020-01 that, during the COVID-19 national emergency, the guiding principle of plans must be to act reasonably, prudently, and in the interest of the covered workers and their families who rely on their health, retirement, and other employee benefit plans for their physical and economic wellbeing. Plan fiduciaries are expected to make "reasonable accommodations" to prevent the loss of benefits by participants and to attempt to minimize the possibility of individuals losing benefits because of a failure to comply with pre-established timeframes. The DOL's approach to enforcement during this time will be to emphasize compliance assistance while providing for grace periods and other appropriate relief.

For more information about the employee benefit implications of the COVID-19 pandemic and how they might affect your employee benefit plans, please contact any one of Ice Miller's Employee Benefits attorneys. Please contact our COVID-19 Task Force if you have any questions about managing the risks of the coronavirus pandemic. Also see our Coronavirus (COVID-19) Resource Center for additional resources, which is updated daily.

This publication is intended for general information purposes only and does not and is not intended to constitute legal advice. The reader should consult with legal counsel to determine how laws or decisions discussed herein apply to the reader's specific circumstances.