Agencies Extend Benefit Plan Compliance Deadlines Due to COVID-19

Practical Law Legal Update w-025-2636 (Approx. 13 pages)

Agencies Extend Benefit Plan Compliance Deadlines Due to COVID-19

by Practical Law Employee Benefits & Executive Compensation

Final Rule Addresses HIPAA, COBRA, and Claims-Related Timeframes

The Departments' final rule extends certain timeframes under the Employee Retirement Income Security Act of 1974 (ERISA) and Internal Revenue Code (Code) during the COVID-19 national emergency for:

Group health plans, disability and other welfare plans, and retirement plans.
Participants and beneficiaries of these plans.

(See Practice Note, COVID-19 Compliance for Health and Welfare Plans.)

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 may 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).

In the final rule, the Departments (citing authority under ERISA and the Code) therefore extend certain timeframes for plans and their participants and beneficiaries (ERISA § 518 (29 U.S.C. § 1148); Code § 7508A(b) (26 U.S.C. § 7508A(b))).

Affected Group Health Plan Mandates

The final rule specifically addresses the following group health plan mandates:

Special enrollment timeframes under HIPAA's portability requirements, including coverage under Medicaid and the Children's Health Insurance Program (CHIP) (see Practice Note, HIPAA Special Enrollment Rights and Standard Document, HIPAA Special Enrollment Rights: Initial Notice).
COBRA's health plan continuation coverage requirements, including COBRA election procedures (and other notice requirements) and premium payment deadlines (see Practice Note, COBRA Overview).
The DOL's claims procedure requirements for ERISA plans, including timeframes for filing initial claims and appealing plan benefit denials (see Practice Note, Claims Procedure Requirements for Group Health Plans).
The Affordable Care Act's (ACA's) internal claims, appeals, and external review procedures (see Practice Notes, Internal Claims and Appeals Under the ACA and External Review Under the ACA).

For more information on these requirements, see Group Health Plans Toolkit and Practice Note, Affordable Care Act (ACA) Overview.

Specific Relief Provisions for Participants and Beneficiaries

Under the final rule, all group health plans, disability, other employee welfare benefit plans, and employee pension benefit plans subject to ERISA or the Code must 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 a future notice) for all plan participants, beneficiaries, qualified beneficiaries, or claimants wherever located in calculating certain benefit-related timeframes listed in the final rule. The Departments refer to this set-aside time period as an "outbreak period."

Specifically, the set-aside outbreak period applies to:

The 30-day period (or 60-day period, if applicable) to request HIPAA special enrollment (29 U.S.C. § 1181(f); 26 U.S.C. § 9801(f)).
The 60-day period for electing COBRA (29 U.S.C. § 1165; 26 U.S.C. § 4980B(f)(5)).
The date for making COBRA premium payments (29 U.S.C. § 1162(2)(C) and (3); 26 U.S.C. § 4980B(f)(2)(B)(iii)).
The date for individuals to notify the plan of a COBRA qualifying event or disability determination (29 U.S.C. § 1166(a)(3); 26 U.S.C. § 4980B(f)(6)(C)).
The date within which individuals may file a benefit claim under the plan's claims procedures (29 C.F.R. § 2560.503-1).
The date within which claimants may file an appeal of a benefits denial under the plan's claims procedures (29 C.F.R. § 2560.503-1(h)).
The date within which claimants may request external review after receiving a benefit denial or final internal benefit denial (29 C.F.R. § 2590.715-2719(d)(2)(i); 26 C.F.R. § 54.9815-2719(d)(2)(i)).
The date within which a claimant may file information to perfect a request for external review after finding that the request was not complete (29 C.F.R. § 2590.715-2719(d)(2)(ii); 26 C.F.R. § 54.9815-2719(d)(2)(ii)).

The outbreak period described above is subject to the statutory duration limits in ERISA and the Code, under which a set-aside period of up to one year is permitted (29 U.S.C. § 1148; 26 U.S.C. § 7508A). In addition, the Departments may need to provide subsequent relief extensions at a later time.

COBRA Relief for Group Health Plans

Regarding group health plans, plan sponsors and plan administrators can disregard the outbreak period in determining the date for providing a COBRA election notice (29 U.S.C. § 1166(c); 26 U.S.C. § 4980B(f)(6)(D); see Standard Document, COBRA Election Notice).

Example Involving HIPAA Special Enrollment

The final rule includes several examples of how the outbreak period works in the context of COBRA, HIPAA, and benefit claims. For illustrative purposes, the Departments' examples apply an end date for the COVID-19 national emergency of April 30, 2020. This means that the outbreak period under the examples ends on June 29, 2020 (that is, the 60th day after the end of the national emergency).

Under one example, Employee A is eligible for, but previously declined to participate in, the group health plan sponsored by Employer B. On March 31, 2020, Employee A gave birth and wants to enroll herself and her child in Employer B's plan. However, open enrollment under the plan does not begin until November 15. The example addresses when Employee A may exercise her HIPAA special enrollment rights under Employer B's plan.

In this example, the outbreak period is disregarded in determining Employee A's special enrollment period. Employee A and her child qualify for special enrollment under Employer B's health plan as early as the date of the child's birth. Employee A may exercise her special enrollment rights for herself and her child under Employer B's plan until 30 days after June 29, 2020 (that is, July 29, 2020), if she pays the premiums for any period of coverage.

HHS Enforcement, Including for Nonfederal Governmental Plans

HHS will exercise enforcement discretion and a temporary policy of "measured enforcement" (including timeframes similar to those described above for benefit plans) regarding nonfederal governmental group health plans and health insurers that offer coverage under the Public Health Service Act (PHSA). In the final rule, HHS encouraged:

Sponsors of nonfederal governmental plans to offer relief similar to that under the final rule to their participants and beneficiaries.
States to carry out enforcement using an approach that is consistent with the final rule.

(See Standard Document, NMHPA Notice for Nonfederal Governmental Plans.)

Effective Date

According to the Departments, subjecting the final rule to notice-and-comment rulemaking procedures under the Administrative Procedure Act (APA) would result in undue delay and be contrary to public interest given the COVID-19 pandemic. As a result, the relief under the final rule is effective immediately upon publication in the Federal Register.

EBSA Disaster Relief Notice 2020-01

On April 29, 2020, the DOL's Employee Benefits Security Administration (EBSA) issued Disaster Relief Notice 2020-01, which provides guidance and relief to employee benefit plans due to the COVID-19 outbreak.

Notice 2020-01 was coordinated and reviewed by the Departments. Treasury and HHS have advised the DOL that they concur with the relief specified in the Notice in the application of the laws under their jurisdiction.

Applicability Dates

The guidance and relief contained in the Notice apply to employee benefit plans, plan sponsors, plan fiduciaries, plan participants and beneficiaries, and plan service providers subject to ERISA from March 1, 2020 (the beginning of the national emergency that was announced by President Trump) until 60 days after the announcement of the end of the COVID-19 national emergency or such other date announced by the DOL in a future notice.

If there are different outbreak period end dates for different parts of the country, the DOL will issue additional guidance on how the relief in the Notice applies to those areas.

Extension of Notice Deadlines

Notice 2020-01 provides an extension under ERISA Section 518, as amended by the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) (29 U.S.C. § 1148). Specifically, employee benefit plans and their responsible plan fiduciaries will not violate ERISA for a failure to timely furnish a notice, disclosure, or document that must be furnished between March 1, 2020, and 60 days after the announced end of the COVID-19 national emergency, if the plans and their responsible fiduciaries act in good faith and furnish the notice, disclosure, or document as soon as administratively practicable under the circumstances. This extension applies to notices that must be provided under Title I of ERISA, and over which the DOL has interpretive and regulatory authority, except for the notices and disclosures addressed in the Departments' final rule (see Final Rule Addresses HIPAA, COBRA, and Claims-Related Timeframes and Health Plan Notices and Disclosures Chart).

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.

The relief provided by this Notice is effective immediately upon publication. It applies to blackout notices, among other notices (see Blackout Notices).

Plan Loans and Distributions

Notice 2020-01 provides relief and guidance regarding plan loans and distributions for:

Plan loan and distribution verification procedures.
Plan loans made under the CARES Act.
Plan amendments relating to plan loans allowed under the CARES Act.

Verification Procedures

If a retirement plan fails to follow the plan's procedural requirements for plan loans or distributions, the DOL will not treat it as a failure if:

The failure is solely attributable to the COVID-19 outbreak.
The plan administrator makes:
- a good-faith diligent effort under the circumstances to comply with those requirements; and
- a reasonable attempt to correct any procedural deficiencies, such as assembling any missing documentation, as soon as administratively practicable.

This relief is limited to verification requirements required under provisions of Title I of ERISA that are within the interpretive and regulatory authority of the DOL, and does not include spousal consent or other statutory or regulatory requirements under the jurisdiction of the Treasury Department or the IRS.

Participant Loans Under the CARES Act

The DOL has advised the Treasury Department and IRS that it will not treat any person as having violated the provisions of Title I of ERISA, including the adequate security and reasonably equivalent basis requirements in ERISA Section 408(b)(1) and DOL Regulation Section 2550.408b-1, solely because:

The person made a plan loan to a qualified individual during the loan relief period in compliance with the CARES Act and the provisions of any related IRS notice or other published guidance.
A qualified individual delayed making a plan loan repayment in compliance with the CARES Act and the provisions of any related IRS notice or other published guidance.

(For more information on the plan loan provisions of the CARES Act, see Legal Update, CARES Act Contains Numerous Employee Benefit and Executive Compensation Provisions, Including Changes to COVID-19 Testing Mandate: Increase in Plan Loan Amounts and Repayment Period.)

Certain Plan Amendments Related to the COVID-19 Outbreak

If an employee pension benefit plan is amended to provide the relief for plan loans and distributions provided by the CARES Act, the DOL will treat the plan as being operated in accordance with the terms of that amendment before its adoption if both:

The amendment is made on or before the last day of the first plan year beginning on or after January 1, 2022, or such later date prescribed by the Secretary of the Treasury.
The amendment meets the requirements of Section 2202(c)(2)(B) of the CARES Act relating to plan amendments.

Participant Contributions and Loan Repayments

Under Notice 2020-01, the DOL will not, solely on the basis of a failure attributable to the COVID-19 outbreak, take enforcement action against employers and service providers for a temporary delay in forwarding payments or contributions to a retirement plan if that failure occurs beginning on March 1, 2020, and ending on the 60th day following the announced end of the national emergency. However, employers and service providers must act reasonably, prudently, and in the interest of employees to comply as soon as administratively practicable under the circumstances.

Blackout Notices

Normally, blackout notices must be provided at least 30 calendar days and not more than 60 calendar days before the last date on which participants and beneficiaries can exercise their rights before the start of the blackout period (see Standard Document, Blackout Notice).

The extension of the notice deadlines provided by Notice 2020-01 (see Extension of Notice Deadlines) applies to blackout notices. The DOL will not require a plan administrator to provide a written determination that the inability to provide the notice is due to events beyond the plan administrator's control.

Form 5500 and Form M-1 Filing Relief

Notice 2020-01 provides that Form 5500 filing relief is provided in accordance with IRS Notice 2020-23 (see Legal Update, IRS and PBGC Extend Deadlines Due to COVID-19). DOL Notice 2020-01 provides that Form M-1 filings required for multiple employer welfare arrangements (MEWAs) and certain entities claiming exception (ECEs) are provided relief for the same time period as the Form 5500 extension under IRS Notice 2020-23 (see Legal Update, DOL: Ace Hardware Plan Would Be a MEWA and an Association Health Plan).

General Guidance for All Benefit Plans

Notice 2020-01 also provides several points of general guidance to employee benefit plans during the COVID-19 pandemic:

Plans must act reasonably, prudently, and in the interest of the covered workers and their families.
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 because of a failure to comply with pre-established timeframes.
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, including 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

Although the Departments assumed a national emergency end date of April 30, 2020, for purposes of their examples, the actual national emergency end date (and, as a result, the end date of the follow-on outbreak period) are not yet known and may not occur until several weeks or months in the future. As a result, while the final rule is intended to help participants and beneficiaries (and plans) during the COVID-19 pandemic, plan administrators will ultimately need to monitor and build in the outbreak period (once it is known) in calculating the timeliness of certain benefit actions. This will be especially important with regard to COBRA, which includes detailed timing rules governing notice and premium payment situations.

Agencies Extend Benefit Plan Compliance Deadlines Due to COVID-19 | Practical Law