COVID-19 plan administration relief: The good, the bad, and the ugly

Agency Guidance Provides Both Relief and Frustration

On April 28, 2020, the U.S. Department of Labor (“DOL”) and U.S. Department of the Treasury (“Treasury”)[1] coordinated the release of guidance providing certain plan administration relief in response to the COVID-19 National Emergency.[2] The U.S. Department of Health & Human Services (“HHS”)[3] indicated it would issue similar guidance and did so on June 5, 2020.

• EBSA Disaster Relief Notice 2020-01(the “EBSA Notice”) – The EBSA Notice provides limited relief for certain plan filings, broad relief for the delivery of plan disclosures and notices, and relaxes the rules for electronic delivery.
• Extension of Certain Timeframes for Employee Benefit Plans, Participants, and Beneficiaries Affected by the COVID–19 Outbreak Final Rule(the “Final Rule”) – The Final Rule suspends various plan administration deadlines. Most of this relief gives employees/participants more time to enroll when certain events occur, file claims for benefits or appeal denied claims, and elect and pay for COBRA. Group health plans must administer these employee/participant rights but get limited consolation in the form of COBRA election notice relief.
• COVID-19 FAQs for Participants and Beneficiaries(the “COVID-19 FAQs”) – The COVID- 19 FAQs are intended to help employees and participants understand how the EBSA Notice and Final Rule may affect them.
• CMS COVID-19 Letter to Non-Federal Governmental Plans(the “CMS Letter”) – The CMS Letter encourages, but does not require, non-federal governmental plans to provide the same or similar relief described in the EBSA Notice and Final Rule to employees and participants. The CMS Letter also provides non-federal governmental plans with broad relief for the delivery of plan notices and disclosures and relaxed rules for electronic delivery. Non- federal governmental plans include state, county, and city plans as well as other public sector governmental plans such as public school districts. The CMS Letter also encourages, but does not require, non-federal governmental plans to provide and promote telemedicine and other remote care services without cost sharing.

Snapshot of Guidance Applicable to Group Health Plans

This Alert solely addresses the guidance applicable to group health plans, and it does not cover any guidance for retirement plans (e.g. 401(k) plans, pension plans, etc.). The following is a snapshot of the guidance as it applies to ERISA plans, church plans, and non-federal governmental plans:

(a) Special enrollment rights do not apply to HIPAA-excepted benefits.

(b) ERISA plans may take advantage of this relief but are not required to do so.

(c) Church plans are not subject to ERISA’s plan disclosure and notice requirements or COBRA unless the plan has elected to be treated as an ERISA plan.[4] Many church plans do offer continuation coverage on the same or similar terms and could choose to comply voluntarily with the Final Rule’s COBRA provisions.

(d) ERISA plan disclosures and notices do not apply to non-federal governmental plans, but the CMS Letter indicates the same relief will be available for the disclosure and notice requirements that do apply to these plans.

Note: It may be difficult for a non-federal governmental plan to revoke relief that has already been provided to one or more participants (e.g. an extended period to elect COBRA), at least with respect to those participants. We recommend employers in this situation seek the advice of legal counsel.

The “Outbreak Period”

President Trump declared March 1, 2020 to be the first day of the National Emergency caused by the COVID-19 pandemic. The Final Rule defines the term “Outbreak Period” to mean the period beginning March 1, 2020 and ending 60 days after the announced end of the National Emergency or such other date or dates announced by the DOL and/or Treasury in future guidance. In a footnote, the DOL and Treasury leave open the possibility that the Outbreak Period may end at different times in different parts of the country. In general, the relief provided under the EBSA Notice and Final Rule applies throughout the Outbreak Period. The exception is the limited filing relief for Forms 5500, 990, and M-1 that has a separate end date described in more detail below.

Notes: The Outbreak Period does not end in a given location merely because a state or local government ends a general quarantine or shelter-in-place order. Also, the Final Rule appeared April 28, 2020. For the purposes of several examples, it used April 30, 2020 as the declared end of the National Emergency and treated June 29, 2020 (60 days after April 30th) as the end of the Outbreak Period. The dates used were purely for the examples, and no declared end to the National Emergency has occurred as of this Alert’s publication date.

Relief during the Outbreak Period

Notification Requirements

The EBSA Notice and Final Rule do not explicitly require plans to notify affected employees and participants about the additional rights created by the relief. As discussed earlier, the model COBRA notices released by the DOL after the EBSA Notice and Final Rule do not mention the additional COBRA rights, and the DOL or Treasury have not released any other updated group health plan model notices. ERISA does require the disclosure of these additional rights via SPDs or SMMs, but it allows up to 210 days from the end of the plan year in which the change(s) took place to do so.[9]

Effective plan administration, the EBSA Notice and Final Rule’s requirement for plans, plan administrators, and plan sponsors to act in good faith, and general fiduciary responsibilities (please see Fiduciary Responsibilities below) put pressure on plans to communicate the additional rights as soon as it is practical to do so. It may be reasonable for plans to satisfy this requirement by providing the COVID-19 FAQs to employees and participants. The DOL drafted them specifically to explain the additional rights to the public.

Different faces in different places: Remember that the DOL and Treasury left open the possibility that the Outbreak Period may end at different times in different parts of the country. If this actually occurs, some multi-state employers may find themselves subject to different plan administration requirements for participants covered under the same plan(s) at the same time.

Fiduciary Responsibilities

In the EBSA Notice, the DOL reminds plans and plan sponsors of their fiduciary responsibilities to “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.” This responsibility includes providing “reasonable accommodations to prevent the loss of benefits or undue delay in benefits payments.” Plans and plan sponsors should act to minimize the risk of benefits loss due to a failure to notify affected employees and participants of their rights or otherwise comply in good faith with both established plan administration requirements and the relief provided by the EBSA Notice and Final Rule.

DOL Relaxes Electronic Delivery Rules

During the Outbreak Period, the DOL authorizes communication with employees and participants via emails, text messages, and/or websites as “good faith” delivery of communication so long as the plan fiduciary “reasonably believes [plan participants and beneficiaries] have effective access to [such] electronic means of communication” and/or “continuous access” to websites. If communication during the Outbreak Period proves successful, the DOL may consider finally updating its existing electronic delivery safe harbor rules written twenty years ago.

DOL Follows IRS’ Lead in Providing Limited Filing Relief

The IRS previously issued IRS Notice 2020-23, which automatically delayed the filing date for Forms 5500 and 990 that were due on or after April 1, 2020 through July 14, 2020 until July 15, 2020. The DOL incorporated this Form 5500 extension into the EBSA Notice[10] and further extended this relief to Form M-

1. Please see our Alert for more information about these extended filing deadlines.

The COVID-19 FAQs

The COVID-19 FAQs consist of 23 questions written from the employee/participant perspective and answered by the DOL. The first 12 questions are specific to the additional rights discussed in this Alert for group health plans and indicate:

• Participants have more time to request special enrollment, elect and pay for COBRA, file claims for benefits and appeals of adverse benefit determinations, and request external review for denied claims;
• Participants should review the applicable SPD(s) and ask questions about their rights;
• Employers are generally free to change their plans during the year; and
• Individuals may have additional coverage options in addition to employer-provided group health plans, such as the Public Health Insurance Marketplace, Medicare, and Medicaid.

Note: The DOL indicates in the FAQs that the loss of a COBRA subsidy from a former employer is a Marketplace special enrollment event. This is consistent with U.S. Department of Health and Human Services (HHS) information on Healthcare.gov, which contradicts applicable HHS regulations. It appears the federal agencies intend to disregard the HHS regulations and treat the loss of a COBRA subsidy as a Marketplace special enrollment event.

[1] The Employee Benefits Security Administration (EBSA) is an agency within the DOL. The IRS is an agency within Treasury.

[2] President Trump declared March 1, 2020 as the first day of a National Emergency caused by the COVID-19 pandemic.

[3] The Center for Medicare & Medicaid Services (CMS) is an agency within HHS.

[4] Church plans can opt in to ERISA status by making an election under Internal Revenue Code Section 410(d). Although rare, this does occur. A 410(d) election is irrevocable (please see Treasury Regulation 1.410(d)-1)).

[5] HIPAA requires a special enrollment window of at least 30 days (31 days is common) for marriage, birth or adoption, or the loss of other health coverage and at least 60 days for certain Medicaid/CHIP events. Plans may provide for longer periods.

[6] The employee cannot pay for this period of retroactive coverage for other special enrollment events on a pre-tax basis. The employee must pay after-tax or the employer can provide on a tax-free basis (assuming no discrimination under the Internal Revenue Code).

[7] Final Rule, Example 3,which states that a plan may retroactively pay for benefits during the Outbreak Period.

[8] Most plan administrators will need the assistance of the insurance carrier or third party administrator.

[9] This may or may not be affected by the relief to provide disclosures and notices during the Outbreak Period depending upon the plan year. The additional rights do not affect SBCs.

[10] The IRS and DOL have joint authority for Form 5500 filings.

The information contained herein is for general informational purposes only and does not constitute legal or tax advice regarding any specific situation. Any statements made are based solely on our experience as consultants. Marsh & McLennan Agency LLC shall have no obligation to update this publication and shall have no liability to you or any other party arising out of this publication or any matter contained herein. The information provided in this alert is not intended to be, and shall not be construed to be, either the provision of legal advice or an offer to provide legal services, nor does it necessarily reflect the opinions of the agency, our lawyers or our clients. This is not legal advice. No client-lawyer relationship between you and our lawyers is or may be created by your use of this information. Rather, the content is intended as a general overview of the subject matter covered. This agency is not obligated to provide updates on the information presented herein. Those reading this alert are encouraged to seek direct counsel on legal questions. © 2020 Marsh & McLennan Agency LLC. All Rights Reserved.