DOL Addresses Duration of Outbreak Period Compliance Extensions Due to COVID-19

Practical Law Legal Update w-029-8991 (Approx. 6 pages)

DOL Addresses Duration of Outbreak Period Compliance Extensions Due to COVID-19

by Practical Law Employee Benefits & Executive Compensation

National Emergency Declaration Due to COVID-19

On March 13, 2020, President Trump declared the US outbreak of COVID-19 to be a national emergency under the Robert T. Stafford Disaster Relief and Emergency Assistance Act (Stafford Act). Due to the national emergency, the Departments recognized that benefit plan participants and beneficiaries could have difficulty completing certain plan-related activities, for example:

Exercising their health coverage portability rights under the Health Insurance Portability and Accountability Act of 1996 (HIPAA) (see HIPAA Privacy, Security, and Breach Notification Toolkit).
Completing health plan continuation coverage actions under the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) (see COBRA Toolkit).
Filing or perfecting benefit claims (see Practice Note, Internal Claims and Appeals Under the ACA and Claims Procedure Requirements for Retirement and Certain Other ERISA Plans Checklist).

Prior Guidance on Outbreak Periods and HIPAA, COBRA, and Claims-Related Deadlines

In their May 2020 joint notice, the Departments (citing authority under ERISA and the Internal Revenue Code) extended certain timeframes for plans, participants, and beneficiaries (ERISA § 518 (29 U.S.C. § 1148); Code § 7508A(b) (26 U.S.C. § 7508A(b)). Under the joint notice, all group health plans, disability, other employee welfare benefit plans, and employee pension benefit plans subject to ERISA or the Code were required to disregard the period from March 1, 2020, until 60 days after the announced end of the COVID-19 national emergency (or such other date announced by the Departments in future guidance) for all plan participants, beneficiaries, qualified beneficiaries, or claimants wherever located in calculating certain benefit-related timeframes listed in the joint notice.

The Departments referred to this set-aside time period as an "outbreak period." However, the outbreak period is subject to statutory duration limits in ERISA and the Code—which impose a one-year maximum on the Departments' outbreak period (29 U.S.C. § 1148; 26 U.S.C. § 7508A).

In related guidance (Notice 2020-01), the Departments provided an extension under ERISA Section 518, as amended by the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) (29 U.S.C. § 1148). Under this guidance, plans and plan fiduciaries would not violate ERISA for failing to timely furnish a notice, disclosure, or document that was required to be furnished between March 1, 2020, and 60 days after the announced end of the COVID-19 national emergency. This assumed that plans and fiduciaries acted in good faith and furnished relevant notices and disclosures as soon as administratively practicable under the circumstances.

Latest Guidance Addresses Ongoing COVID-19 Pandemic

Notice 2021-01 reflects that—due to the ongoing nature of the COVID-19 pandemic—the outbreak periods under the Departments' earlier guidance has now intersected with the one-year statutory limits for this guidance under ERISA and the Code. This is because the outbreak period relief began on March 1, 2020 and one year from that date was February 28, 2021.

Under Notice 2021-01, individuals and plans with timeframes covered by the Departments' earlier guidance will have applicable periods under that guidance disregarded until the earlier of:

One year from the date they were eligible for the relief.
60 days after the announced end of the COVID-19 national emergency.

The disregarded period may not exceed one year.

As reflected by the following examples from Notice 2021-01, this means that an individual's ultimate compliance deadline is keyed to when the individual first becomes eligible for the one-year set-aside period. For example, if, absent the relief under the Departments' earlier guidance:

A COBRA qualified beneficiary would have been required to make a COBRA election by March 1, 2020, then the deadline for making the election is delayed until February 28, 2021.
A COBRA qualified beneficiary would have been required to make a COBRA election by March 1, 2021, then the deadline for making the election is delayed until the earlier of March 1, 2022, or the end of the outbreak period.
A plan or fiduciary would have been required to furnish a notice or disclosure by March 1, 2020, then the notice or disclosure must be provided on or before March 1, 2021.

General Guidance for All Benefit Plans

The Departments also announced the following compliance principles for plans during the COVID-19 pandemic, given the one-year statutory limit on the Departments' ability to grant relief:

Plans must act reasonably, prudently, and in the interest of employees and their dependents.
Plan fiduciaries should make "reasonable accommodations" to prevent the loss of benefits or undue delay in benefits payments and should try to minimize the possibility of individuals losing benefits due to a failure to comply with pre-established timeframes. For example, fiduciaries should consider:
- sending an individual a notice concerning the end of the relief period, if the plan knows (or has reason to know) that the individual is at risk of losing benefits because the relief period is ending; and
- informing participants and beneficiaries who are losing coverage of other available coverage options (for example, under the Affordable Care Act (ACA) health insurance exchanges).

The Departments indicated that plan disclosures sent before or during the COVID pandemic may need to be reissued or amended if the disclosures failed to provide accurate information about the deadlines by which participants and beneficiaries must take action (for example, COBRA election notices and claims procedure notices).

In addition, the Departments stated that when the COVID-19 pandemic prevents plans and service providers from fully and timely complying with claims processing and other ERISA requirements, the DOL's approach to enforcement will emphasize compliance assistance and include grace periods and other relief where appropriate. This includes when physical disruption to a plan or service provider's principal place of business makes compliance with pre-established timeframes for certain claims' decisions or disclosures impossible.

Practical Impact

The individual-specific compliance deadlines resulting from the DOL's latest guidance will no doubt be challenging from a benefits administration perspective, and will require close tracking of individuals' claims (and other benefit actions) by third-party administrators and other plan service providers. As noted, the Departments' new interpretation of their outbreak period guidance also may require plans to re-send previously issued notices (which likely did not specify when participants or beneficiaries were required to take certain action). And the prospect of plans providing "reasonable accommodations" to participants and beneficiaries to prevent the loss or delay of benefits raises potentially thorny issues, as a special exception made available to one participant could set a precedent that becomes a general rule of compliance going forward.

DOL Addresses Duration of Outbreak Period Compliance Extensions Due to COVID-19 | Practical Law