DOL and IRS Extend Certain Timeframes for Employee Benefit Plans, Participants, and Beneficiaries Affected by the COVID-19 Outbreak

On May 4, 2020, the Employee Benefits Security Administration (EBSA, which is part of the U.S. Department of Labor) and the Internal Revenue Service (IRS) issued joint guidance extending certain timeframes otherwise applicable to group health plans, disability and other welfare plans, pension plans, and their participants and beneficiaries under ERISA and the Code.

This guidance will require Plan Sponsors to temporarily revise their administrative practices and their form notices used in connection with COBRA, HIPAA’s Special Enrollment rights, and ERISA Claim Procedures.

I. Background

HIPAA requires group health plans to provide special enrollment rights for certain people upon the loss of eligibility for other coverage, or upon the addition of a dependents due to birth, adoption, etc. Generally, group health plans must allow such individuals to enroll in the group health plan if they are otherwise eligible and if enrollment is requested within 30 days of the occurrence of the event.

COBRA permits qualified beneficiaries who lose coverage under a group health plan to elect continuation health coverage. COBRA generally provides a qualified beneficiary a period of at least 60 days to elect COBRA continuation coverage under a group health plan. Plans are required to allow payment of premiums in monthly installments, and plans cannot require payment of premiums before 45 days after the day of the initial COBRA election. COBRA continuation coverage may be terminated for failure to pay premiums timely.

Under the COBRA rules, a premium is considered paid timely if it is made not later than 30 days after the first day of the period for which payment is being made. Notice requirements prescribe time periods for employers to notify the plan of certain qualifying events and for individuals to notify the plan of certain qualifying events or a determination of disability. Notice requirements also prescribe a time period for plans to notify qualified beneficiaries of their rights to elect COBRA continuation coverage.

ERISA requires plans to establish and maintain reasonable claims procedures and imposes additional rights and obligations with respect to internal claims and appeals and external review for non-grandfathered group health plans.

II. Temporary Extensions Under the Guidance

All of the foregoing provisions include timing requirements for certain acts in connection with employee benefit plans, some of which have been temporarily modified by the new guidance. These changes, and the implications for Plan Sponsors, are summarized below.

A. Relief for Plan Participants, Beneficiaries, Qualified Beneficiaries, and Claimants

Subject to a one year statutory duration limitation, all group health plans, disability and other employee welfare benefit plans, and employee pension benefit plans subject to ERISA or the Code must disregard the period from March 1, 2020 until sixty (60) days after the announced end of the National Emergency (the “Outbreak Period”) for all plan participants, beneficiaries, qualified beneficiaries, or claimants wherever located in determining the following periods and dates—

(1) The 30-day period (or 60-day period, if applicable) to request special enrollment under ERISA section 701(f) and Code section 9801(f)

Implications for employers:

  • Work with your third-party administrator and insurance carriers to ensure the extended special enrollment period is implemented for the duration of the Outbreak Period, which could require retroactive coverage as far back as March 1.
  • Determine whether and how to communicate the extension to employees.

(2) The 60-day election period for COBRA continuation coverage under ERISA section 605 and Code section 4980B(f)(5)

(3) The date for making COBRA premium payments pursuant to ERISA section 602(2)(C) and (3) and Code section 4980B(f)(2)(B)(iii) and (C)

(4) The date for individuals to notify the plan of a qualifying event or determination of disability under ERISA section 606(a)(3) and Code section 4980B(f)(6)(C)

Implications for Employers:

  • This exacerbates the adverse selection issue inherent in COBRA because Plans may have to provide retroactive coverage for many months.
  • The problem is made worse by the fact that, even though qualified beneficiaries theoretically have to pay for the retroactive coverage, if they elect COBRA right after the qualifying event, they do not have to pay until after the Outbreak Period ends. This means a qualified beneficiary could elect COBRA and receive the coverage) and then subsequently decide not to pay for it. Plan Sponsors and insurers will then have the option of retroactively terminating the coverage and trying to adjust the claims already paid.
  • Work with your third-party administrator and insurance carriers to ensure they have implemented the extended COBRA periods.
  • Either temporarily revise your COBRA notices and forms or ensure a temporary cover is added to all COBRA communications as necessary to inform employees and qualified beneficiaries of the extended timeframes.

(5) The date within which individuals may file a benefit claim under the plan’s claims procedure pursuant to 29 CFR 2560.503-1

(6) The date within which claimants may file an appeal of an adverse benefit determination under the plan’s claims procedure pursuant to 29 CFR 2560.503-1(h)

Implications for Employers:

  • Work with your third-party administrator and insurance carriers to ensure they have implemented the extended claims periods.
  • Either temporarily revise your claims notices and forms or ensure a temporary cover is added to all claims communications as necessary to inform employees and qualified beneficiaries of the extended timeframes.
  • This will impact health flexible spending accounts (“FSAs”) and health reimbursement arrangements (“HRAs”) that have run-out periods that extended beyond March 1, 2020. Because the Outbreak Period began on March 1, 2020, any health FSAs and HRAs that have March or April deadlines for submitting prior-year expenses for reimbursement, will need to extend the deadline until 60 days after the Outbreak Period ends to submit expenses for reimbursement for the 2019 plan year.

(7) The date within which claimants may file a request for an external review after receipt of an adverse benefit determination or final internal adverse benefit determination pursuant to 29 CFR 2590.715-2719(d)(2)(i) and 26 CFR 54.9815-2719(d)(2)(i), and

(8) The date within which a claimant may file information to perfect a request for external review upon a finding that the request was not complete pursuant to 29 CFR 2590.715-2719(d)(2)(ii) and 26 CFR 54.9815-2719(d)(2)(ii)

Implications for employers:

  • Work with your third-party administrator and insurance carriers to ensure they have implemented the extended claim review periods.
  • Either temporarily revise your claims notices and forms or ensure a temporary cover is added to all claims communications as necessary to inform employees and qualified beneficiaries of the extended timeframes.

B. Relief for Group Health Plans

With respect to group health plans, and their sponsors and administrators, the Outbreak Period shall be disregarded when determining the date for providing a COBRA election notice under ERISA section 606(c) and Code section 4980B(f)(6)(D).

Implication for Employers:

  • Plan administrators are not required to provide the COBRA election notice during the Outbreak Period. As a practical matter, however, plan administrators likely will want to timely provide election notices to encourage qualified beneficiaries to timely elect and pay for COBRA coverage.

Updated Disability Claims Procedures Go Into Effect April 2, 2018

The Department of Labor’s final rules updating the procedures for disability claims goes into effect on April 2, 2018. This post summarizes the new rules; which plans are affected by the new rules; and the next steps affected plans should take.

Affected Plans

The Claims Procedure Regulations at C.F.R. §2560.503-1 affect all ERISA Plans, including pension plans such as defined benefit and 401(k) plans, welfare benefit plans like medical and disability insurance plans. As a practical matter, the changes to the rules for disability claims only impacts plans that actually make disability determinations. Therefore, if your pension or 401(k) Plan relies on disability determinations made by a third party, like the Social Security Administration, you should not need to make any changes to your plan documents or your claims procedures as a result of the new rules.

Next Steps

Affected plans have until December 31, 2018 to adopt the necessary plan amendments, but the amendment will need  to be effective, and Plans will need to comply with the revised rules, as of April 2, 2018. Affected Plans will also need to update their Summary Plan Descriptions to reflect the new rules.

Summary of the Changes

The new rules amend the claims procedure regulation at 29 C.F.R. §2560.503-1 for disability benefits to require that plans, plan fiduciaries, and insurance providers comply with additional procedural protections when dealing with disability benefit claimants. Specifically, the final rule includes the following changes in the requirements for the processing of claims and appeals for disability benefits:

  • Basic Disclosure Requirements. Benefit denial notices must contain a more complete discussion of why the plan denied a claim and the standards used in making the decision. For example, the notices must include a discussion of the basis for disagreeing with a disability determination made by the Social Security Administration if presented by the claimant in support of his or her claim.
  • Right to Claim File and Internal Protocols. Benefit denial notices must include a statement that the claimant is entitled to receive, upon request, the entire claim file and other relevant documents. Previously, this statement was required only in notices denying benefits on appeal. Benefit denial notices also have to include the internal rules, guidelines, protocols, standards or other similar criteria of the plan that were used in denying a claim or a statement that none were used. Previously, instead of including these internal rules and protocols, benefit denial notices have the option of including a statement that such rules and protocols were used in denying the claim and that a copy will be provided to the claimant upon request.
  • Right to Review and Respond to New Information Before Final Decision. The new rule prohibits plans from denying benefits on appeal based on new or additional evidence or rationales that were not included when the benefit was denied at the claims stage, unless the claimant is given notice and a fair opportunity to respond.
  • Avoiding Conflicts of Interest. Plans must ensure that disability benefit claims and appeals are adjudicated in a manner designed to ensure the independence and impartiality of the persons involved in making the decision. For example, a claims adjudicator or medical or vocational expert could not be hired, promoted, terminated or compensated based on the likelihood of the person denying benefit claims.
  • Deemed Exhaustion of Claims and Appeal Processes. If plans do not adhere to all claims processing rules, the claimant is deemed to have exhausted the administrative remedies available under the plan, unless the violation was the result of a minor error and other specified conditions are met. If the claimant is deemed to have exhausted the administrative remedies available under the plan, the claim or appeal is deemed denied on review without the exercise of discretion by a fiduciary and the claimant may immediately pursue his or her claim in court. The revised rule also provides that the plan must treat a claim as re-filed on appeal upon the plan’s receipt of a court’s decision rejecting the claimant’s request for review.
  • Certain Coverage Rescissions are Adverse Benefit Determinations Subject to the Claims Procedure Protections. Rescissions of coverage, including retroactive terminations due to alleged misrepresentation of fact (e.g. errors in the application for coverage) must be treated as adverse benefit determinations, thereby triggering the plan’s appeals procedures. Rescissions for non-payment of premiums are not covered by this provision.
  • Notices Written in a Culturally and Linguistically Appropriate Manner. The final rule requires that benefit denial notices have to be provided in a culturally and linguistically appropriate manner in certain situations.