On April 28, 2020, the IRS and the DOL jointly issued a final rule extending certain time frames applicable to benefit plans and plan participants and beneficiaries. The rule is scheduled to published in the Federal Register on May 4, 2020. Under the final rule, all group health and welfare benefit plans and all employee pension benefit plans that are subject to ERISA or the Internal Revenue Code are required to disregard the time from March 1, 2020 (the effective date of the national emergency declared by the President) until sixty days after the end of the national emergency (or such other date announced by the agencies in a future notice) with respect to certain plan activities.
What Plan Activities Are Affected?
The final rule applies to the following activities and deadlines under affected plans:
- Special enrollment. The Health Insurance Portability and Accountability Act (HIPAA) generally requires group health plans to offer “special enrollment” opportunities to employees who gain new dependents and to employees and dependents who lose eligibility for other group health or insurance coverage mid-year. Special enrollment rights must be exercised within 30 days of the special enrollment event (60 days if the event relates to CHIP coverage).
- COBRA election and payment. The Consolidated Omnibus Budget Reconciliation Act, commonly known as COBRA, allows qualified plan participants who lose coverage under a group health plan to elect COBRA continuation coverage within 60 days of the loss of coverage or the date of the COBRA election notice, if later. Participants then have an additional 45 days to pay the premium for COBRA coverage. Plans can terminate COBRA continuation coverage if a premium payment is not made within 30 days after the first day of the coverage period to which the premium relates.
- COBRA notices. In connection with the COBRA rights explained above, COBRA requires plan participants and beneficiaries to notify the plan of certain COBRA events. The plan must also provide the COBRA election notice to participants and beneficiaries within 14 days after receiving notice of a COBRA qualifying event.
- Benefit claims and appeals. Plans typically provide that claims must be submitted within a period of time specified by the plan after the expense is incurred, service is rendered, or benefit is refused. Generally group health plans and plans providing disability benefits must give participants and beneficiaries at least 180 days after an adverse benefit decision to appeal and other welfare benefit plans and pension plans must give participants at least 60 days to appeal non-disability claims. Group health plans subject to external independent review requirements also impose certain timeframes for requesting external review.
- Because retirement plans are not subject to HIPAA special enrollment or COBRA provisions, the only provision relevant to retirement plans is this provision regarding benefit claims and appeals.
For affected plans, the above deadlines are tolled from March 1 until 60 days after the end of the national emergency related to COVID-19. When determining whether an action is timely, the period from March 1 through 60 days after the end of the national emergency is not included in the determination. The final rule contains several examples of how the tolling works. This is a mandate, not an option.
What Plans Are Affected?
ERISA health and welfare plans are affected, including medical, disability, dental, and vision plans; flexible spending accounts; and health reimbursement accounts (HRAs), for example. Retirement plans that are subject to ERISA or the Internal Revenue Code, including pension, 401(k), 403(b), and 457 plans, are also affected with respect to claims and appeals deadlines.
The US Department of Health and Human Services (HHS), which oversees nonfederal governmental group health plans and group health plan insurers, has stated that it concurs with the relief set out by the IRS and DOL. HHS encourages nonfederal governmental health plan sponsors and group health plan insurers to operate consistently with the IRS and DOL guidance.
What Should Employers/Plan Sponsors Do?
Fully insured health and welfare plans will rely on the insurer to administer the benefits claims and appeals. However, eligibility and enrollment is often a plan sponsor activity that is outsourced to vendors, as is COBRA. Plan sponsors will need to coordinate with their COBRA and enrollment administrators to ensure compliance with the final rule. In addition, self-insured plan sponsors will have to adjust their internal administration processes or coordinate with their third party administrator with respect to claims processes so that participants receive correct information regarding the claims and appeals deadlines and claims and appeals are processed correctly.
HIPAA special enrollment rights will need to be administered carefully. Many enrollment systems automatically calculate the date by which an election is due from the event date. Either systems must be adjusted or manual processes must be implemented to ensure the tolling period is accounted for correctly. In addition, coverage for the special enrollment events of birth, adoption or placement for adoption must be retroactive to the event, which coverage for other special enrollment events may be prospective following the date of election (often the first day of the month following the election). Extra care will be needed to ensure effective dates are implemented and premiums withheld correctly.
COBRA presents special issues for compliance with the final rule. Group health plans should continue following their normal processes regarding COBRA coverage during the election period and the following payment period – if coverage is normally continued during the election and payment period and then terminated retroactively if a COBRA election or payment is not timely received, coverage should be continued during the tolling period; or, if coverage is normally pended or terminated and then reinstated retroactively upon receipt of the COBRA election and payment, the same process should be following during the tolling period. In addition, COBRA coverage cannot be terminated for nonpayment during the tolling period. However, all missed payments will be due within 30 days (or such longer period specified by the plan) following the end of the tolling period. To the extent payments are not made, COBRA coverage can be terminated retroactively to the first coverage period for which payment in full is not received by the extended deadline. Plan sponsors should consider coordinating with their COBRA vendors to ensure that participants are fully informed about deadlines for elections and payments, including missed payments, both now and once the end of the tolling period is known, to avoid COBRA benefit claims. In addition, plans will need to adjust time frames for COBRA elections and extensions which are based on participants giving notice to the plan of COBRA events such as divorce or disability.
Retirement plan sponsors will also need to communicate with their third party administrator and/or adjust their internal claims and appeals processes to ensure compliance.
Plan sponsors should communicate the extension of the deadlines to affected participants and in any case, cannot take any action contrary to the extension of such deadlines (such as refusing appeals as untimely if the appeal deadline is tolled). If you have questions about how this new rule affects your employee benefits plans, or what action you should be taking, contact a member of our Employee Benefits team.
|Cydni Waldner, Attorney
|John C. Hughes, Partner