IRS and EBSA Provide Additional Relief for Health and Retirement Plans and Participants Due to COVID-19
On May 4, 2020, the Employee Benefits Security Administration ("EBSA") in the Department of Labor ("DOL") and the Internal Revenue Service ("IRS") issued new guidance on delays due to COVID-19 affecting all health and retirement plans, with implications for governmental plans. In addition, EBSA issued independent guidance on April 28, 2020 for plans subject to the Employee Retirement Income Security Act ("ERISA").
EBSA and the IRS (together, "Agencies") filed a
joint notice ("Joint Notice") extending numerous deadlines applicable to retirement and health plans subject to the ERISA. The Joint Notice requires plans to disregard the period beginning March 1, 2020 and ending 60 days after the COVID-19 national emergency terminates in determining deadlines for:
- Special enrollment;
- COBRA 60-day election periods;
- COBRA premium payments;
- Appeals of adverse benefit determinations;
- Requests for external review;
- COBRA election notices; and
- Benefit claims pursuant to a plan's claims procedures
The DOL has also issued EBSA
Disaster Relief Notice 2020-01, granting 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
- Loans provided pursuant to the CARES Act
- Forwarding repayments of participant loans to a plan
- Form 5500 and Form M-1 filings
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 and EBSA Disaster Relief Notice 2020-01. 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 and Notice 2020-01.
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 ("Stafford Act"), a national emergency existed beginning March 1, 2020.
Section 518 of ERISA (29 U.S.C. § 1148) and Section 7508A of the Internal Revenue Code ("Code") permit the Agencies to, in the case of a Presidentially declared disaster under the Stafford Act, prescribe a period of up to 1 year to be disregarded for purposes of applying any deadline under ERISA or the Code.
Joint Notice
The
Joint Notice is effective as of May 4, 2020, the day it was published in the Federal Register. The Agencies determined there was good cause to bypass the ordinary notice and public participation process to avoid undue delay contrary to the public interest. They noted that, as a result of the national emergency, participants and beneficiaries in employee benefit plans may encounter problems in exercising certain rights under those plans, and that sponsors of such plans will similarly have problems in the administration of the plans during the national emergency. Therefore, immediate relief is necessary.
The Joint Notice technically applies only to plans subject to ERISA and the Code. However, HHS—which has jurisdiction over non-federal governmental plans and insurance issuers—concurs with the Joint Notice's relief and 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 to provide relief similar to that granted in the Joint Notice, and encourages states and insurance issuers to enforce and operate, respectively, in a manner consistent with the Joint Notice.
Relief
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)
The Joint Notice designates a period of time, called the "Outbreak Period," that begins on March 1, 2020 and ends 60 days after the announced end of the national emergency under the Stafford Act. To the extent there are different Outbreak Period end dates for different parts of the country, the Agencies will issue additional guidance regarding the application of this relief.
The examples in this article assume the national emergency ends on May 29, 2020, and that, therefore, the Outbreak Period ends on July 28, 2020.
The Joint Notice requires all plans to disregard the Outbreak Period for all participants, beneficiaries, qualified beneficiaries, and claimants for purposes of applying the following periods and dates:
- Special Enrollment Periods. The 30-day (or 60-day, as applicable) period to request special enrollment.
Section 701(f) of ERISA (29 U.S.C. § 1181(f)) and Section 9801(f) of the Code 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.
- COBRA Election Periods. The 60-day election period for COBRA continuation coverage.
ERISA Section 605 (29 U.S.C. § 1165) and Code Section 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.
- COBRA Premium Payment Deadlines. The date for making COBRA premium payments.
ERISA Section 606(2)(C) and (3) (29 U.S.C. § 1162(2)(C), (3)) and Code Section 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 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.
- COBRA Notice of Qualifying Event. The date for notifying the plan of a qualifying event or determination of disability.
ERISA Section 606(a)(3) (29 U.S.C. § 1166(a)(3)) and Code Section 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) within, generally, 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.
- COBRA Election Notice Deadlines. The date for providing a COBRA election notice.
ERISA Section 606(c) and Code Section 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 then 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.
- Benefit Claims Deadlines. The date by which to file a benefit claim under a plan's claims procedure.
A plan's claims procedure, subject to DOL regulations, specifies the period in which an individual may file a benefit claim. This relief applies to all plans covered by the DOL's 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.
- Appeals Deadlines. The date by which to appeal an adverse benefit determination.
A plan's claims procedure, subject to DOL 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 DOL's 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.
- Deadlines for Requesting External Review. The date by which a claimant must file a request for external review after receiving an adverse benefit determination or final internal adverse benefit determination.
DOL and Treasury regulations require group health plans and insurers to allow claimants four months from the date of notice in which to request external review of an adverse benefit determination or final internal adverse benefit determination.
- Deadlines for Perfecting Requests for External Review. The date by which a claimant must file information to perfect a request for external review after learning the request was incomplete.
DOL and Treasury regulations require group health plans to allow claimants who have filed an incomplete request for external review of an adverse benefit determination or final internal adverse benefit determination 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.
EBSA Disaster Relief Notice 2020-01
On April 28, 2020, the DOL issued
EBSA Disaster Relief Notice 2020-01, providing relief in a number of areas. While Notice 2020-01 technically applies only to plans subject to ERISA, HHS— which has jurisdiction over non-federal governmental plans and insurance issuers—concurs with the Joint Notice's relief and 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.
Deadlines for all Required Notices and Disclosures
The DOL will not consider a plan or fiduciary to violate 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, 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 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.
Deadline for Adopting Loans and Distributions Permitted by CARES Act
ERISA Plans may operate in accordance with the loan and distribution provisions of Section 2202 of the CARES Act (which offers coronavirus-related distributions, increased loan limits, and delayed loan repayment) 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 Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") and the IRS for amending plans for these provisions.
Plan Loans under 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. For more information about loans under the CARES Act, see our discussion
here.
Deadline for Forwarding Participant Contributions and Loan Repayments to Plan
Under existing DOL guidance, participant contributions and loan repayments are considered plan assets and must be forwarded to the plan on the earliest date 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, solely due to a failure attributable to COVID-19, take enforcement action against a temporary delay in forwarding participant payments or contributions. Employers are advised to act reasonably, prudently, and in the interest of employees to forward the amounts as soon as administratively practicable.
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, which we discuss
here. With respect to Forms 5500 due prior to July 15, 2020, the IRS delayed the deadline for those Forms 5500 to July 15, 2020.
The DOL's General Approach
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 IRS relief related to the COVID-19 pandemic and how it might affect your employee benefit plans, please contact
Gary Blachman,
Audra Ferguson-Allen,
Rob Gauss,
Melissa Proffitt,
Kathleen Sheil Scheidt,
Tara Sciscoe,
Chris Sears,
Lisa Erb Harrison,
Austin Anderson, or the Ice Miller LLP
Employee Benefits attorney with whom you work.
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.