U.S. Department of Labor Further Extends Certain Employee Benefit Deadlines due to COVID-19
As summarized in this Client Alert, new DOL guidance, in essence, says that the delay of certain employee benefit deadlines due to COVID-19 is to be determined on an individual-by-individual basis – rather than a one-size-fits-all delay.
In our May 1, 2020 Client Alert (found here), we informed you that on April 29, 2020, the U.S. Department of Labor (“DOL”) along with the Internal Revenue Service (“IRS”) issued a joint final rule extending specific deadlines affecting COBRA continuation coverage, special enrollment periods, claims for benefits, appeals of denied claims, and external review of certain claims. Simultaneously, the DOL issued guidance in the form of Notice 2020-01 (the "Notice") extending the deadline for issuing certain notices required under ERISA. The joint final rule provided extra time for participants and beneficiaries of group health plans to meet certain deadlines affecting COBRA continuation coverage, special enrollment, filing claims for benefits, appeals of denied claims, and external review of certain claims. For disability, retirement and other plans, participants and beneficiaries had extra time to make claims for benefits and appeal denied claims.
Our Client Alert Alert explained that all group health plans, disability plans, and other employee welfare benefit plans, and employee pension benefit plans subject to ERISA (the Employee Retirement Income Security Act of 1974 as amended) or the Code (the Internal Revenue Code of 1986 as amended) must disregard the period from March 1, 2020 until sixty (60) days after the announced end of the COVID-19 National Emergency (the “Outbreak Period”) for all plan participants, beneficiaries, qualified beneficiaries, or claimants wherever located in determining various periods and dates.
Significantly, in our Client Alert, we noted that under statutory rules, any time period to be disregarded cannot be of more than 1 year of duration. This 1-year period has now expired for some participants, and so the DOL has issued new guidance in the form of EBSA Disaster Relief Notice 2021-01.
The new DOL relief – which is best understood through examples – is that the disregarded period ends upon the earlier of (a) 1 year from the date individuals were first eligible for relief, or (b) 60 days after the announced end of the National Emergency (i.e. the end of the Outbreak Period). On the applicable date, the timeframes for individuals and plans with periods that were previously disregarded will resume. In no case will a disregarded period exceed 1 year.
Examples:
If a participant’s employment ended prior to March 1, 2020, and (in the absence of the COVID-19 relief) the employee would have been required to make a COBRA election by March 1, 2020 – then applying both the Joint Rule and the new DOL guidance - instead of the COBRA election period expiring on March 1, 2020 - the individual’s COBRA election time period ended on March 1, 2021. Why March 1, 2021? Because the Outbreak Period remains ongoing, March 1, 2021, is the earlier of 1 year from March 1, 2020 or the end of the Outbreak Period.
A participant experiences a termination of employment and is provided a COBRA election notice on April 1, 2020. The 60-day COBRA election period would normally begin April 2, 2020 and expire on May 31, 2020. However, applying both the Joint Rule and the new DOL guidance, the disregarded period is from April 2, 2020 to April 1, 2021. Accordingly, the individual’s 60-day COBRA election time period begins on April 2, 2021 and ends on May 31, 2021.
A participant adopts a child on April 1, 2020. The 30-day HIPAA special enrollment period would normally begin April 2, 2020 and expire on May 1, 2020. However, applying both the Joint Rule and the new DOL guidance, the disregarded period is from April 2, 2020 to April 1, 2021. Accordingly, the special enrollment period for the child begins on April 2, 2021 and ends on May 1, 2021.
If a COBRA qualified beneficiary would have been required to make a COBRA election by March 1, 2021, the Joint Notice and the new DOL guidance delay that election requirement until the earlier of 1 year from that date (i.e., March 1, 2022) or the end of the Outbreak Period. The end of the Outbreak Period is 60 days after the end of the COVID-19 National Emergency.
If a plan would have been required to furnish a notice or disclosure by March 1, 2020, the extended time frame ended with respect to that notice or disclosure on February 28, 2021. The responsible plan fiduciary would be required to ensure that the notice or disclosure was furnished on or before March 1, 2021.
Guiding Fiduciary Principles
The DOL recognized that even though extended time frames may no longer be available for some participants/beneficiaries, participants/beneficiaries may still encounter an array of problems due to the ongoing COVID-19 pandemic. The DOL advises plan fiduciaries that:
The guiding principle for administering employee benefit plans is to act reasonably, prudently, and in the interest of the workers and their families who rely on their health, retirement, and other employee benefit plans for their physical and economic well-being. This means that plan fiduciaries should make reasonable accommodations to prevent the loss of or undue delay in payment of benefits in such cases and should take steps to minimize the possibility of individuals losing benefits because of a failure to comply with pre-established time frames.
Plan fiduciaries may need to send supplemental notices to participants/beneficiaries
As an example, the DOL notes that where the plan administrator or other responsible plan fiduciary knows, or should reasonably know, that the end of the relief period for an individual action is exposing a participant or beneficiary to a risk of losing protections, benefits, or rights under the plan, the administrator or other fiduciary should consider affirmatively sending a notice regarding the end of the relief period.
Moreover, plan disclosures issued prior to or during the pandemic may need to be reissued or amended if such disclosures failed to provide accurate information regarding the time in which participants and beneficiaries were required to take action, e.g., COBRA election notices and claims procedure notices.
Further, in the case of ERISA group health plans, plans should consider ways to ensure that participants and beneficiaries who are losing coverage under their group health plans are made aware of other coverage options that may be available to them, including the opportunity to obtain coverage through the Health Insurance Marketplace in their state.[1]
Providing only a slight degree of flexibility to plan fiduciaries, the DOL acknowledged that there may be instances when full and timely compliance with ERISA’s disclosure and claims processing requirements by plans and service providers may not be possible, including when pandemic or natural disaster-related disruption to a plan or service provider's principal place of business makes compliance with pre-established time frames for certain claims' decisions or disclosures impossible. In the case of fiduciaries that have acted in good faith and with reasonable diligence under the circumstances, the DOL’s approach to enforcement will be marked by an emphasis on compliance assistance and includes grace periods and other relief.
As soon as possible, plan administrators/employers should discuss with service providers of their ERISA plans the individual-specific extended time periods provided under the new DOL guidance as well as the possible obligation to issue additional notices/communications to individuals explaining the individual-specific extended deadlines.
Kindly contact the author of this Client Alert or another member of the Butzel Long employee benefits practice group with any questions or for assistance applying the new guidance.
Tom Shaevsky
248.258.7858
shaevsky@butzel.com
[1] The DOL notes that a special enrollment period is available to the consumers in the 36 states that use the HealthCare.gov platform starting on February 15, 2021 and continuing through May 15, 2021. At least 13 states plus the District of Columbia, which operate their own Marketplace platforms, are offering a similar opportunity.
