The coronavirus outbreak has affected virtually every aspect of normal life and business relations, including operation and administration of employee benefit plans. To assist plan participants and beneficiaries, employers and other plan sponsors, plan fiduciaries, and other service providers of employee benefit plans impacted by the COVID-19 pandemic, the U.S. government took action as authorized by ERISA Section 518.
On April 28, 2020, the U.S. Department of Labor’s Employee Benefits Security Administration (EBSA) issued EBSA Disaster Relief Notice 2020-01 (Disaster Relief Notice). The Disaster Relief Notice provides deadline relief and other guidance and extends the time for plan officials to furnish benefit statements, annual funding notices, and other notices and disclosures required by Title I of the Employee Retirement Income Security Act of 1974 (ERISA).
Additionally, on April 28, 2020, the Department of Treasury, the Internal Revenue Service, and EBSA issued a joint notice which extends certain time frames affecting participants and beneficiaries under ERISA and the Internal Revenue Code (Joint Notice). The Joint Notice extends certain time frames affecting a participant’s right to group health plan coverage during the COVID-19 outbreak, special enrollment periods, and COBRA continuation of such coverage after employment ends. Time periods for filing claims for benefits, appealing denied claims, and external review periods are also extended.
While the Department of Health and Human Services (HHS) was not involved in this round of guidance, it has been in consultation with EBSA and the Treasury and has advised that it will extend similar relief timeframes applicable to non-Federal governmental group health plans.
The News Release and Frequently Asked Questions regarding the Disaster Notice and Joint Notice can be found here:
The Joint Notice is applicable to all group health plans, disability plans, other employee welfare benefit plans, and employee pension benefit plans subject to ERISA or the Code. Specifically, these plans must disregard the period from March 1, 2020 until sixty (60) days after the National Emergency ends (or other specified date) when determining certain deadlines for plan participants, beneficiaries, qualified beneficiaries, and claimants. This period is called the Outbreak Period. In particular, plans must disregard the Outbreak Period for the following due dates:
- HIPAA Special Enrollment
- COBRA Election Period
- COBRA Premium Payment Due Date
- Date for Individuals to Notify the Plan of Qualifying Events or Disability Determinations
- Claim Procedure Date for Individuals to File A Benefit Claim
- Keep in mind health FSA runout periods and forfeitures are also delayed during this period
- Claim Procedure Date for Claimants to File An Appeal
- Date for Claimants to File A Request for External Review
- Date for Claimants to Perfect A Request for External Review
Note: The Joint Notice only extends the claims procedure deadlines for claimants; it does not explicitly extend the date by which a plan administrator has to respond to claims and appeals. However, the plan administrator’s deadlines for issuing such adverse benefit determination on claims and appeals would appear to fall within the general notice and disclosure relief provided by the Disaster Relief Notice.
Additionally, for purposes of group health plan obligations, the Outbreak Period is disregarded for the following:
- Date to Provide a COBRA Election Notice
The Joint Notice includes a number of examples to explain how these rules take effect. Each of these examples assumes that the National Emergency ends on April 30, 2020, meaning that the Outbreak Period extends from March 1, 2020 through June 29, 2020, the latter date being 60 days after the National Emergency ends.
With regard to COBRA, one of the listed examples maintains an employee loses group health plan coverage due to a reduction in hours. The COBRA election notice is provided on April 1, 2020. Although typically an individual has 60 days to elect COBRA, here the Outbreak Period is disregarded. Therefore, the 60 day period begins to run on June 29, 2020, so the individual has until August 28, 2020 to elect COBRA.
In another example, an employee was eligible for but declined enrollment in her employer’s group health plan. On March 31, 2020 she gave birth and wants to enroll herself and her child, which is a 30-day HIPAA special enrollment right. The Outbreak Period (again through June 29, 2020 for purposes of these examples) is disregarded, so the 30 day enrollment ends instead on July 29, 2020.
Employers will want to pay close attention to these deadlines as they can have significant administrative and economic impacts. For example, group health plans may have to bear the financial responsibility for continuing premium contributions for months prior to a beneficiary making a COBRA payment. See Example 3:
Example 3 (COBRA premium payments).
(i) Facts. On March 1, 2020, Individual C was receiving COBRA continuation coverage under a group health plan. More than 45 days had passed since Individual C had elected COBRA. Monthly premium payments are due by the first of the month. The plan does not permit qualified beneficiaries longer than the statutory 30-day grace period for making premium payments. Individual C made a timely February payment, but did not make the March payment or any subsequent payments during the Outbreak Period. As of July 1, Individual C has made no premium payments for March, April, May, or June. Does Individual C lose COBRA coverage, and if so for which month(s)?
(ii) Conclusion. In this Example 3, the Outbreak Period is disregarded for purposes of determining whether monthly COBRA premium installment payments are timely. Premium payments made by 30 days after June 29, 2020, which is July 29, 2020, for March, April, May, and June 2020, are timely, and Individual C is entitled to COBRA continuation coverage for these months if she timely makes payment. Under the terms of the COBRA statute, premium payments are timely if made within 30 days from the date they are first due. In calculating the 30-day period, however, the Outbreak Period is disregarded, and payments for March, April, May, and June are all deemed to be timely if they are made within 30 days after the end of the Outbreak Period. Accordingly, premium payments for four months (i.e., March, April, May, and June) are all due by July 29, 2020. Individual C is eligible to receive coverage under the terms of the plan during this interim period even though some or all of Individual C’s premium payments may not be received until July 29, 2020. Since the due dates for Individual C’s premiums would be postponed and Individual C’s payment for premiums would be retroactive during the initial COBRA election period, Individual C’s insurer or plan may not deny coverage, and may make retroactive payments for benefits and services received by the participant during this time.
Importantly, the Joint Notice acknowledges that different geographical regions may have different Outbreak Period end dates. In such case, additional guidance will be issued.
Disaster Relief Notice
In the Disaster Relief Notice, the Department of Labor announced an extension of deadlines for furnishing certain required notices and disclosures to plan participants, beneficiaries and others in order for plan sponsors to meet their ERISA obligations during the coronavirus outbreak.
Subject to the duration limitation in ERISA section 518, an employee benefit plan and the responsible plan fiduciary will not be in violation of 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 plan and responsible fiduciary act in good faith and furnish the notice, disclosure, or document as soon as administratively practicable under the circumstances. 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.
Such notices include Summary Plan Descriptions, Summaries of Material Modifications, benefit determinations, annual funding notices, periodic benefit statements, summary annual reports, participant fee disclosures, QDIA notices, and blackout notices, as long as good faith efforts are made to furnish these documents as soon as administratively practicable. Of note, this Disaster Relief Notice uses the same Outbreak Period as in the Joint Notice.
Employee Pension Benefit Plans
The Disaster Relief Notice also addresses certain items specific to employee pension benefit plans, including:
An ERISA retirement plan’s failure to follow the usual procedural requirements for plan loans and distributions will not be treated as a failure by the DOL, provided that:
- The failure is solely attributable to the COVID-19 outbreak;
- The plan administrator makes a good-faith diligent effort to comply with ERISA’s procedural requirements;
- The plan administrator makes a reasonable attempt to correct any procedural deficiencies as soon as practicable.
The DOL confirmed that it will not treat participant loans as violating ERISA if those loans comply with the increased loan limits and/or suspension of loan repayments provided by the CARES Act, and that it will treat a plan as having been operated in accordance with its terms with respect to certain plan loan and distribution provisions available under the CARES Act if the plan satisfies the conditions for the extended amendment deadline under the CARES Act. This guidance is unsurprising, but appreciated.
The Disaster Relief Notice also indicates that the DOL will not take enforcement action if a plan fiduciary fails to meet the usual deadlines for forwarding participant contributions and loan repayments to a plan during the Outbreak Period, if the failure is solely attributable to the COVID-19 outbreak, provided the employer and/or service provider acts reasonably, prudently, and in the interest of employees to comply as soon as administratively practicable under the circumstances.
Finally, the Disaster Relief Notice specifically confirms that blackout notices are covered by the general good faith relief from notice and disclosure deadlines under ERISA section 518 described earlier, and further provides that a plan fiduciary is not required to make a written determination that the failure to meet the normal 30-day advance notice requirement was due to events beyond the reasonable control of the plan administrator, as a pandemic inherently satisfies that standard.
Form 5500 and Form M-1 Filing Relief
The IRS had previously extended the Form 5500 deadline in certain limited cases related to the COVID-19 pandemic. See IRS Notice 2020-23. Specifically, for filings otherwise due on or after April 1, 2020 and before July 15, 2020 are now due on July 15, 2020. This does NOT apply to calendar year plans as their filings are due July 31, 2020 and are outside the relief period. Presumably, this is because calendar year plans can already obtain an automatic extension of their 2019 Form 5500 deadline until October 15, 2020. However, the guidance indicates that the DOL will continue to monitor the situation and may issue further relief depending on how things unfold.
The Disaster Relief Notice now extends this same relief to Form M-1 filings. Form M-1 is applicable to multiple employer welfare arrangements (MEWAs) and certain other entities required to report for their ERISA group health plans. While Form M-1 is normally due March 1, if an entity had timely requested a 60-day extension, that extended period falls within the relief period and now would be due by July 15, 2020.
General Compliance Guidance
Last, the Disaster Relief Notice provides several points of general ERISA fiduciary compliance guidance during this coronavirus pandemic, notably that:
- Plans must 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 should make reasonable accommodations to prevent the loss of benefits or undue delay in benefits payments.
- When the pandemic prevents plans and service providers from fully and timely complying with claims processing and other ERISA requirements, the Department of Labor will emphasize compliance assistance and include grace periods and other relief where appropriate.
Importantly, however, the fiduciary relief provided by the Disaster Relief Notice is generally limited to adoption of nonenforcement positions by the DOL. It does not necessarily restrict a participant’s ability to enforce his or her substantive rights under ERISA.
As you are well aware, the law and guidance are rapidly evolving in this area. Please check with your Fraser Trebilcock attorney for the most recent updates.
This alert serves as a general summary, and does not constitute legal guidance. Please contact us with any specific questions.
We have created a response team to the rapidly changing COVID-19 situation and the law and guidance that follows, so we will continue to post any new developments. You can view our COVID-19 Response Page and additional resources by following the link here. In the meantime, if you have any questions, please contact your Fraser Trebilcock attorney.
Elizabeth H. Latchana specializes in employee health and welfare benefits. Recognized for her outstanding legal work, in both 2019 and 2015, Beth was selected as “Lawyer of the Year” in Lansing for Employee Benefits (ERISA) Law by Best Lawyers, and in 2017 as one of the Top 30 “Women in the Law” by Michigan Lawyers Weekly. Contact her for more information on this reminder or other matters at 517.377.0826 or firstname.lastname@example.org.