As the country continues to experience the effects of the COVID-19 pandemic, the Department of Labor (DOL) and Department of the Treasury issued new guidance to help protect health insurance for covered employees and their families. The two agencies published a joint notice on May 4, 2020, establishing an “Outbreak Period” beginning March 1, 2020, and ending 60 days after the declared COVID-19 National Emergency has ended.

This Outbreak Period stops the clock on several deadlines related to eligibility, premium payments, claims, and appeals under COBRA and ERISA employee benefit plans. The DOL also issued EBSA Disaster Relief Notice 2020-1 (DOL Relief Notice), which provides relief for plan administrators by extending the deadlines to provide certain notices and plan disclosures.

Plans Affected

The joint notice applies to all group health plans, disability and welfare plans, and pension plans subject to ERISA or the Internal Revenue Code (Affected Plans). Additionally, the Department of Health and Human Services has advised that it will extend similar timeframes for non-Federal governmental group health plans and insurance issuers offering group health plan coverage. HHS is also encouraging states to do the same.

Deadlines Extended

Affected Plans must now exclude the Outbreak Period when calculating the following periods and deadlines:

• The 30-day period (and in some cases 60-day period) that allows an employee to request special enrollment under an ERISA plan following certain life events, such as marriage or the birth of a child
• The 60-day period following a qualifying event, during which an employee can elect COBRA continuation coverage
• The due date for all COBRA premium payments
• The deadline for an individual to notify the plan regarding a COBRA qualifying event or determination of disability
• The deadline for an individual to file a benefit claim under the plan terms
• The deadline for a claimant to file an appeal of an adverse benefit determination
• The deadline for a claimant to file a request for external review of an adverse benefit determination
• The deadline for a claimant to file information required to perfect an incorrect or incomplete request for external review

For example, an employee who experiences a qualifying event can generally elect COBRA continuation coverage any time within 60 days following their insurance termination date. If an employee’s insurance was terminated on January 31, 2020, the employee normally would have been required to make the COBRA election no later than March 31, 2020. However, the clock stopped on March 1 and will not re-start until the end of the Outbreak Period. After the end of the Outbreak Period, the employee will still have 31 days to make the COBRA election.

It is also possible that the DOL will extend the Outbreak Period in certain parts of the country if some states continue to experience a state of emergency that lasts longer than the National Emergency. If that occurs, the DOL will issue additional guidance.

Additional Relief for ERISA Employee Benefit Plans and Responsible Fiduciaries

Notices and Disclosures:

The DOL recognizes that plan administrators may have difficulty complying with notice and disclosure deadlines at this time. As a result, the deadlines for furnishing notices, disclosures, and other documents (notices) required under Title I of ERISA, such as SPDs and notices of blackout periods, have been extended.

Under this extension, a benefit plan and the responsible plan fiduciary will not violate ERISA if they fail to timely provide a notice that would normally be due during the Outbreak Period as long as the plan and its responsible fiduciary act in good faith to furnish the required notices as soon as administratively practicable. Additionally, the plan and its fiduciaries will be considered to have acted in good faith by providing notices through electronic means, such as email, text messaging, and continuous access websites, as long as the fiduciary reasonably believes the participant has access to that form of electronic communication.

Group health plans may also have additional time to provide COBRA election notices under the language of the joint notice; however, the regulation is currently unclear. We recommend continuing to send COBRA notices within the required timeframes until additional clarification is provided.

Blackout Notices:

As noted above, the deadlines for submitting blackout notices have been extended during the Outbreak Period. Normally, blackout notices must be sent 30 days in advance of any blackout period that suspends, limits or restricts a participant’s rights under the plan. However, an exception exists when the plan fiduciary determines in writing that the plan is unable to provide this advance notice due to events beyond the plan administrator’s reasonable control. The DOL Relief Notice indicates that a pandemic is “by definition beyond a plan administrator’s control,” so the written determination is not necessary. Plan administrators should continue to send blackout notices in advance when possible. When advance notice is not possible, the notices must be sent as soon as administratively practicable.

Claims Processing:

The DOL Relief Notice does not provide a specific extension for processing plan claims. However, it indicates that the DOL’s approach to enforcement will acknowledge that full and timely compliance with claims processing may not always be possible. Grace periods and other relief will be available where appropriate, specifically when physical disruption to the principal place of business of the plan or its service provider makes compliance with decision or disclosure timeframes impossible.  

Plan Loans and Distribution Relief

Verification Procedures:

Additional relief is provided for employee pension benefit plans when following their verification procedures as required by Title I of ERISA. If the plan deviates from its standard procedural requirements when making plan loans or distributions, the DOL will not treat the deviation as a plan failure as long as all of the following requirements are met:

• the failure is solely attributed to COVID-19
• the plan administrator made a good-faith, diligent effort to comply with the procedural requirements
• as soon as administratively practicable, the plan administrator makes a reasonable attempt to correct the procedural deficiencies

Participant Contributions and Loan Repayments:

When an employer receives or withholds funds intended for contribution or repayment to a participant loan under a pension benefit plan, the employer is generally required to forward those funds to the plan no later than 15 business days following the end of the month in which the funds were received or withheld. If an employer experiences a temporary, COVID-19 related delay during the Outbreak Period but sends the funds as soon as administratively practicable, the DOL will not take enforcement action.

Plan Participant Loans under the CARES Act

The CARES Act increased the availability of participant loans to an aggregate limit of $100,000 and up to 100% of the employee’s vested accrued benefit. It also allows for a delay in loan repayment up to one year for all payment due between March 27, 2020, and December 31, 2020.

Compliance with these terms of the CARES Act could create an ERISA violation. As a result, the DOL Relief Notice indicates that it will not treat anyone as having violated Title I of ERISA, including the adequate security and reasonably equivalent basis requirements, simply because the person made a loan in compliance with the CARES Act or the participant delayed making a loan payment in compliance with the CARES Act.

Big Picture

Plan fiduciaries and participants should review and follow the deadline extensions to help alleviate the effects of COVID-19. These extensions will continue for at least 60 days following the end of the declared state of National Emergency. When making plan administration decisions, plan fiduciaries should follow the DOL’s General ERISA Fiduciary Compliance Guidance:

“The Department recognizes that affected plan participants and beneficiaries may encounter problems due to the COVID-19 outbreak. The guiding principle for plans must be 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. Plan fiduciaries should make reasonable accommodations to prevent the loss of benefits or undue delay in benefits payments in such cases and should attempt to minimize the possibility of individuals losing benefits because of a failure to comply with pre-established timeframes.”