Due to the COVID-19 National Emergency, the Department of Labor (DOL) and Internal Revenue Service (IRS) recognize that it may be difficult for plan sponsors to comply with various pre-established deadlines imposed under ERISA and the Code, and that it may be difficult for participants and beneficiaries to timely exercise their rights. The DOL and IRS recently issued guidance providing relief in the form of extended deadlines for complying with various deadlines and other notice obligations. This relief generally applies for the period beginning March 1, 2020, until 60 days after the announcement of the end of the COVID-19 National Emergency (the “Outbreak Period”).
Extended Election and Payment Periods
In general, the Outbreak Period must be disregarded for determining the following deadlines:
- The 30-day election period to request special enrollment under a group health plan.
- The date by which a COBRA election notice must be provided.
- The 60-day election period for electing COBRA continuation coverage.
- The due date for timely paying COBRA premiums, including the 45-day period for the initial premium payment and the 30-day grace period for all future premium payments.
- The date by which an individual must notify the plan sponsor of a qualifying event or a determination of disability.
- The dates within which an individual must file a benefit claim, appeal an adverse benefit determination or file or perfect a request for an external review of an adverse benefit determination.
The guidance provides several examples to illustrate these extended deadlines. The examples assume that the COVID-19 National Emergency ends on April 30, 2020, and the Outbreak Period ends on June 29, 2020. With these dates in mind, the examples provide as follows:
- An individual experiences a qualifying event under COBRA on April 1, 2020. The individual’s deadline for electing COBRA is August 28, 2020, which is 60 days after the end of the Outbreak Period.
- An employee experiences an event that triggers special enrollment rights under the employer’s group health plan on March 31, 2020. The employee’s deadline for exercising those rights is July 29, 2020, which is 30 days after the end of the Outbreak Period.
- An individual who had elected COBRA timely paid the February 2020 premium but failed to make any subsequent premium payments. The individual will timely pay the COBRA premium payments for March, April, May and June if payment is made no later than July 29, 2020, which is 30 days after the end of the Outbreak Period. Coverage must be retroactively reinstated for this time period. If, instead, the individual only pays the premiums for March and April, then coverage must be provided only for those months.
- An individual receives medical treatment on March 1, 2020, but the claim is not submitted for payment until April 1, 2021. The group health plan requires that claims be submitted within 365 days of the date of the medical treatment. In this case, the submission of the claim for payment on April 1, 2021, is timely. The deadline for submitting the claim is June 29, 2021, which is 365 days after the end of the Outbreak Period.
- An individual received an adverse benefit determination of his disability claim on January 28, 2020. The deadline for this individual to appeal the claim is November 24, 2020, which is 148 days (180 days minus 32 days) after the end of the Outbreak Period. The 180-day period to appeal the claim is reduced by the number of days prior to March 1, 2020.
- An individual receives an adverse benefit determination under the employer’s 401(k) plan on April 15, 2020. The deadline for this individual to appeal the claim is August 28, 2020, which is 60 days after the end of the Outbreak Period.
Relief for Plan Sponsors
In addition, the DOL indicates that plan sponsors will not be in violation of ERISA for failing to timely provide a notice, disclosure or document that must be provided during the Outbreak Period, if the plan sponsor and other responsible fiduciaries act in good faith and furnish the materials as soon as administratively practicable. Depending on the circumstances, acting in good faith can include providing these materials through an electronic alternative, including emails, texts and website access. Specifically, the DOL guidance provides the following relief for employee pension plans:
- No violation of ERISA will occur if the plan administrator fails to follow procedural requirements for verifying a plan loan or distribution if (i) the failure is solely attributable to COVID-19, (ii) the plan administrator makes a good faith effort to comply with the requirements, and (iii) the plan administrator makes a good faith attempt to correct any deficiencies, such as missing documentation, as soon as administratively practicable. Note that this relief does not apply to spousal consent or other consents required under IRS regulations.
- No violation of the ERISA requirements for plan loans will occur if the employer implements the increased loan limits and delay in loan repayments provided for in the CARES Act.
- No enforcement action will be taken with respect to temporary delays in forwarding participant contributions solely due to COVID-19, so long as the employer and service providers acted reasonably, prudently and in the best interests of employees.
- No strict enforcement of the 30-day period for providing advance notice of a “blackout” period (e.g., where participants’ and beneficiaries’ rights to change investments, request loans or request distributions are restricted), and no requirement that the plan administrator and fiduciary determine in writing that the failure to timely provide the notice was beyond the plan administrator’s control.
In general, the DOL encourages employers to act reasonably, prudently and in the best interests of employees and their family members, to make reasonable accommodations and to minimize the possibility of a loss of benefits if employees are unable to strictly comply with pre-established deadlines. Likewise, the DOL will apply grace periods and other enforcement relief if the employer is unable to strictly comply with pre-established deadlines due to a disruption in the employer’s principal place of business because of COVID-19.
Other Recent Guidance
On May 4, 2020, the IRS issued a series of questions and answers relating to coronavirus-related distributions and the new loan provisions contained in the CARES Act. While further guidance will be issued in the near future, the IRS suggested that the guidance will generally apply the same principles that applied to tax-favored distributions and plan loans under the Katrina Emergency Tax Relief Act of 2005 for victims of Hurricane Katrina.
The IRS also indicated that an employer can choose whether, and to what extent, it will amend its retirement plans to implement the new coronavirus-related distribution and loan provisions. Even if the employer does not amend its retirement plan to permit coronavirus-related distributions, the participant may treat a distribution received during 2020 as a coronavirus-related distribution if the conditions contained in the CARES Act are met. More information is available here.
Unrelated to COVID-19, the DOL recently issued updated versions of the model COBRA general notice and the model COBRA election notice. The updated notices are designed to ensure that qualified beneficiaries better understand the interactions between Medicare and COBRA.
While the COVID-19 temporary relief provides some comfort for employers and plan administrators who are struggling to comply with notice and disclosure requirements, the extended deadlines may present some administrative challenges. Employers should carefully review the extended deadlines with their insurance carriers, third-party administrators and benefits consultants when applying them to specific situations.