New Rules Provide Extensions to Benefit Plan Compliance Deadlines | Husch Blackwell LLP


On April 29, 2020, the Benefits Security Administration (EBSA), Department of Labor (DOL), Internal Revenue Service, and Department of Treasury (the Agencies) issued a Final Rule (Rule) regarding the extension of time limits under ERISA. and the Internal Revenue Code (Code). The rule applies to group health insurance, disability and provident schemes, pension schemes and deadlines concerning participants and beneficiaries. The Rule is effective upon publication.

EBSA has also issued Notice 2020-1 (the Notice) which provides certain relief to benefit plans, sponsors and trustees.

Final rule

Due to the National Emergency Proclamation regarding COVID-19, the Agencies recognize that participants will face issues maintaining health coverage and filing claims for benefits. As a result, the Agencies have extended various deadlines for providing relief to plan members and beneficiaries.

In particular, the rule provides relief by extending certain time limits by disregarding the “hatching period”. The epidemic period is the period from March 1, 2020 until sixty (60) days after the announced end of the national emergency. As of this writing, it is unclear when the end of the national emergency will be announced.

Below is a summary of the different timeframes impacted by the rule:

Publish

General calendar

Extended deadline

Special registration for group health plans

The request must be made within 30 days of the occurrence of the relevant event (or 60 days under CHIPRA)

Do not count the days included in the “epidemic period”.

COBRA Election Notice for Plan Sponsors

Administrator must provide notice within 30 days of receiving notice from employer, or if administrator and employer are the same, administrator must provide notice to eligible beneficiaries within 44 days following the qualifying event.

COBRA Election Period for Qualified Beneficiaries

The election must be made within 60 days of receipt of the notice of election.

Payment of COBRA premiums by qualified beneficiaries

Premiums must be paid within 45 days of the initial COBRA election; subsequent premiums must be paid within 30 days of the first day of the coverage period.

Notification of Qualifying Event or Disability Determination by Participants

Covered persons must notify the plan administrator within 60 days of certain qualifying events.

Filing of benefit claims by members

The Plan Documents/Claims Procedures outline the timeline.

Appeal filed against participants’ unfavorable determination of benefits

Plan claim documents/procedures indicating timeline; cannot exceed 180 days for disability plans and 60 days for pension and other health plans.

Application for external review and development of a

Request, by Participants

The timeline depends on whether the plan uses the federal or state external review process; cannot exceed 4 months from receipt of adverse benefit determination if using the federal review process.

The Rule applies to all plan participants, beneficiaries, qualifying beneficiaries or claimants, regardless of their geographic location and whether or not that person is affected by COVID-19 in any way.

The agencies have indicated that they may modify these rules or extend the “outbreak period” for different geographic locations if circumstances require.

The Department of Health and Human Services also says it will adopt a temporary policy with similar implications for non-federal group health plans and health insurance issues. In the meantime, plan sponsors of non-federal group health care plans and health insurance issuers must proceed in a manner consistent with the rule.

Important Final Rule Questions

The Rule presents important immediate problems and other problems will certainly arise in practice.

First, plan sponsors will need to closely track the dates when certain notices and events occurred. They will then have to “keep open” the relevant period, which could require software or system changes and force HR departments to closely monitor these dates.

For example, if an eligible beneficiary would otherwise be required to choose COBRA coverage after March 1, 2020, but does not choose COBRA or pay any premium, the rule provides that the eligible beneficiary could choose COBRA and pay all premiums for a coverage retroactive. If the outbreak period extends to July 1, 2020, for example, the qualified beneficiary would have until August 30, 2020 to choose COBRA and pay the premiums for coverage that could be retroactive to January 2020. This would leave the plan (especially a self-insured plan) likely to be subject to large claims during a period when many employees lose their health coverage.

The rule also impacts benefit claims and appeals and may extend the period during which participants can file a lawsuit.

EBSA Notice 2020-1

The notice provides that plan sponsors and trustees will not violate ERISA for failing to provide a timely notice, disclosure or document. The plan sponsor is acting in good faith and providing this information “as soon as administratively practicable under the circumstances”. Sponsors are permitted to communicate such changes by email, text message, and website access, if the Trustee believes recipients have access to such methods of communication.

Thus, it is not clear whether the extended deadlines create a true “safe harbor” for plan sponsors and trustees.

With respect to loans and distributions, if failure to comply with procedures is solely due to COVID-19, the administrator shall make a good faith effort to comply with the procedures, and the administrator shall make a reasonable attempt to correct any deficiencies, the DOL will not treat such delay as a failure of ERISA. However, this relief does not apply to spousal consents or other requirements under the Code.

Additionally, the DOL will not assert a violation of ERISA for the increased loan amounts available under the CARES Act. Some commentators have raised concerns about the “adequate collateral” and “reasonably equivalent basis” rules for increasing loan limits. However, these rules will not apply for loans available under the CARES Act.

With respect to participant contributions to pension plans, the DOL relaxes the standard for contributing to pension plan contributions within a certain time frame. However, while the DOL may relax the standard, we recommend that participant contributions be deposited into pension plans as soon as possible to avoid potential participant claims.

The DOL also relaxes the requirements for a notice of prohibition if the failure to provide such notice is beyond the control of the plan administrator.

Finally, the DOL recommends that trustees continue to act in the best interests of participants and beneficiaries during this time. Plan trustees must make reasonable accommodations to avoid loss of benefits or late payments.

Conclusion

These time extensions are designed to help individuals during these unprecedented times. However, plan sponsors, administrators, and health insurance issuers will need to closely monitor dates and timelines when it comes to employee benefit plans. In effect, everything is put on “pause” during this period, except for plan sponsors and trustees, who may be required to meet the initial deadlines if they are able to do so.

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