Tax Services • Published 5/20/2020 Coronavirus Relief for Plan Participants Adds Administrative Work for Plan Sponsors

Last updated on 5/20/2020

Many employers have been busy managing their workforce through layoffs and furloughs and dealing with the additional compliance issues related to emergency leave, SBA loans, and various payroll tax credits. Adding to these changes, the Internal Revenue Service (IRS), the Department of Labor (DOL), and the Department of Health and Human Services (HHS) issued new regulations on April 28, 2020 that require the immediate attention of health and welfare plan sponsors. Various federal laws allow the IRS, DOL, and HHS to protect participants and beneficiaries in the event of a federally-declared national emergency, such as the COVID-19 pandemic, by suspending the time periods required to take certain actions. The relief will last through the national state of emergency plus an additional 60 days.

The new regulations suspend the following time periods retroactively to March 1, 2020:

1. The 30-day (or 60-day) period to request special enrollment under HIPAA;
2. The 60-day election period for COBRA continuation coverage;
3. The 45-day period to make COBRA premium payments;
4. The date for an individual to notify a plan of a qualifying event or determination of disability;
5. The date within which individuals may file a benefit claim under the plan’s claims procedures;
6. The date within which claimants may file an appeal of an adverse benefit determination under the plan’s claims procedure;
7. The date within which claimants may file a request for an external review; and
8. The date within which a claimant may file information to perfect a request for external review.

This suspension period known as the “Outbreak Period,” will need to be monitored by plan sponsors since the end date is not known. Thus, a participant’s COBRA election period will be held in relief during the Outbreak Period until the end of the national emergency plus 120 days afterward. The 120 days represents 60 days post-Outbreak Period plus the 60-day COBRA election period.

Let’s consider a COBRA-related example.

Suppose Sam is an employee of ABC, Inc. Sam participates in the ABC, Inc. health plan. Sam’s hours are reduced due to the pandemic. Sam therefore loses his eligibility in the plan. This is a COBRA-qualifying event.

ABC, Inc. provides Sam with a COBRA election notice on April 1, 2020. Normally Sam would have 60 days to elect COBRA. However, that 60-day deadline does not apply for Sam during the Outbreak Period.

If the pandemic had ended on April 30, 2020, the Outbreak Period for making a COBRA election would end on June 29, 2020. This is the 60^th day after the end of the pandemic. Then, Sam would have another 60 days (i.e., the typical time period to elect COBRA) from that day. Thus, Sam would have until August 28, 2020 (60 days after June 29, 2020) to elect COBRA. Sam would then have another 45 days from August 28, 2020 in which to make the COBRA premium payments for those months.

Considerations for Plan Sponsors

The extended time period created by these new regulations creates a dilemma for plan sponsors. Should the plan sponsor “pend” claims while they wait to determine if COBRA is actually elected and paid for? While plan sponsors would typically pend claims during the COBRA election and payment period, the length of time involved in this scenario may give rise to other legal issues. The plan sponsor should discuss possible courses of action with their carrier.

A significant concern is whether plan sponsors should notify all participants of this relief and whether plan sponsors should update their COBRA notices. However, temporary modifications to COBRA notices and procedures could lead to additional confusion to plan participants. The regulations are silent on these issues thus far.

As additional guidance is released and relief for plan participants evolves, P&N will provide updates. Please contact us if you have questions about how COVID-19 relief efforts impact your organization’s employee benefit plans.