Suspended Deadlines Under ERISA, Part Two: Sound the Alarm!

Morgan Lewis - ML Benefits
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Morgan Lewis - ML Benefits

At the 11th hour, the US Department of Labor’s Employee Benefits Security Administration (EBSA), with coordination and review by the Internal Revenue Service and the Department of Health and Human Services (collectively, the Agencies), finally issued guidance on the suspension of certain deadlines under the Employee Retirement Income Securities Act of 1974, as amended (ERISA) and the Internal Revenue Code of 1986, as amended (Code). As we described in our February 25, 2021 blog post, the Agencies previously issued EBSA Disaster Relief Notice 2020-01 and a joint final rule (collectively, Guidance) suspending timeframes for special enrollment elections, claims and appeals filing deadlines, and COBRA notice, election, and premium payment deadlines.

Under authority of Section 518 of ERISA and Section 7508(b) of the Code (collectively, the Statute), the Guidance suspended the deadlines to report those events effective March 1, 2020, until 60 days after the announced end of the National Emergency due to COVID-19 or such other date announced by the Agencies in a future notification (i.e., the Outbreak Period). A plain reading of the Statute, however, did not appear to permit an extension of the one-year suspension of these timeframes. In EBSA Disaster Relief Notice 2021-01 (Notice), the Agencies not only confirmed that the statutory one-year period could not be extended, but, faced with a fork in the road on how to interpret the Statute, the Agencies took the road no one wanted to travel, leaving plan fiduciaries and third-party administrators (TPAs) scrambling on how to communicate and administer the guidance provided in the Notice.

The Notice provides that the suspended deadlines will be disregarded (or tolled) until the earlier of (a) one year from the date the plan or individual was first eligible for relief, or (b) the end of the Outbreak Period. There’s an additional clarification (or caveat) that the maximum tolling period will not exceed one year. This interpretation is possibly a plan fiduciary’s and TPA’s worst nightmare because, according to the Notice, each participant or beneficiary has his/her own personal rolling deadline from the date of his/her own event. In other words, the time period each participant or beneficiary has to report an event falling within the Guidance is suspended until the earlier of one year from the date of that event or until the end of the Outbreak Period.

For example:

  • A participant who had a baby on March 9, 2020, and who would have had until April 8, 2020 (absent the National Emergency), to enroll her child in coverage under her employer’s group health plan will now have until April 8, 2021.
    • Special Consideration: While not addressed by the Notice, we assume coverage must still be retroactive to the date of birth in accordance with the HIPAA special enrollment rules and Section 125 of the Code. More guidance would be welcome.
  • A COBRA qualified beneficiary whose election period began on June 1, 2020, will now have until 60 days (the COBRA election period) after May 31, 2021, to make his/her election.
    • Special Consideration: It would appear from the Notice that a COBRA qualified beneficiary whose election period were to begin on June 1, 2021, will have until the earlier of 60 days (the COBRA election period) after May 31, 2022, or the end of the Outbreak Period to make his/her election.

The Notice encourages plan fiduciaries to be proactive about communicating these changes so participants and beneficiaries are aware that deadlines may expire soon. Plan fiduciaries will also need to revisit this once the National Emergency ends to decide whether to provide additional communications at that time. In fact, the Agencies suggest that supplemental notices may be necessary to fulfill ERISA fiduciary duties.

In addition to notifying participants and beneficiaries, plan fiduciaries may consider extending any imminent deadlines to minimize the impact on participants and beneficiaries. For example, the plan fiduciary could extend any deadlines that are expected to expire in March 2021 for a period of up to 30 or 60 days. While the Agencies do not necessarily require this, they do require plan fiduciaries to make reasonable accommodations and take additional steps to minimize the possibility of participants and beneficiaries losing benefits. Plan fiduciaries that choose to extend certain deadlines need to communicate with participants and beneficiaries about any extensions. Additionally, plan fiduciaries will need to reach out to their TPAs and settle on the best approach to comply with the Notice.

[View source.]

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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