On April 28, 2020, the Department of Labor (DOL) and Internal Revenue Service (IRS) issued a Final Rule which extended several employee benefit compliance deadlines. The deadline relief was based on the “end” of the COVID-19 outbreak (the National Emergency), which is unknown at this time. Specifically, group health plans, disability, or other employee welfare benefit plans subject to ERISA must disregard for purposes of notifications, elections and certain claims, the period from March 1, 2020 until 60 days after the announced end of the National Emergency or such other date announced by these agencies in a future notice. The agencies refer to this as the “Outbreak Period.”Subscribe
The relief was effective immediately and applies in the following areas:
- COBRA timeframes and qualifying event notification
- HIPAA special enrollment timeframes
- Claims procedure timeframes
- External review process timeframes
In the IRS and DOL guidance, the agencies indicated that the Outbreak Period will not extend beyond one year as stated in ERISA Section 518 and Internal Revenue Code Section 7508A(b). Specifically, in the guidance, footnote 4 indicates “ERISA section 518 and Code section 7508A(b) generally provide that, in the case of an employee benefit plan, sponsor, administrator, participant, beneficiary, or other person with respect to such a plan affected by a Presidentially declared disaster, notwithstanding any other provision of law, the Secretaries of Labor and the Treasury may prescribe (by notice or otherwise) a period of up to one year that may be disregarded in determining the date by which any action is required or permitted to be completed.”
Without an extension of this 12-month expiration date, TRI-AD believes the clock starts again on March 1, 2021 for COBRA, certain HIPAA special enrollment, and COBRA qualifying events and claims appeals. Some in the industry interpret the rule to mean that the 12 months applies to each individual and their applicable deadline dates. We anticipate additional IRS guidance on this very soon since March 1, 2021 is approaching quickly.
Another issue that needs to be addressed is determining what days can be counted toward deadlines for days prior to March 1, 2020. Employers may count the number of days before March 1, 2020 that had already counted against any deadlines for each participant. However, the deadlines must be calculated for each individual, which is a challenge for third-party administrators. The most efficient method to calculate the new deadlines is to set everyone’s applicable dates to start on March 1, 2021 and only count days from that point forward. However, insurance carriers and stop-loss carriers may not agree to this method. Once again, guidance from the IRS and DOL clarifying this issue will be welcomed.
- Counting pre-March 31, 2020 days – if a participant had been sent a COBRA election form as of February 1, 2020, we can count 29 days towards the 60-day election period so they would have to elect COBRA by April 1, 2021.
- Not counting pre-March 1, 2020 days – some employers are taking the position that they will not count days before March 1, 2020 and start fresh with new deadline dates starting as of March 1, 2021. In the example above, the 60-day election period would begin on March 1, 2021 so the eligible participant would have to elect by April 30, 2021. This is certainly easiest and more generous to participants; however, some insurance carriers may not agree with this approach and will not allow their client(s) to disregard the days before March 1, 2020.
In a related development, Congress may pass a bill that includes a government-paid COBRA subsidy for those individuals who have experienced a COBRA qualifying event. TRI-AD continues to actively monitor the legislative landscape. If such a bill is passed, we will be prepared to address the subsidy. This occurred in 2010 with the passage of the Affordable Care Act, so we anticipate that the process will be similar.
TRI-AD and our Associates’ suggestions or recommendations shall not constitute legal advice. No content on our website can be construed as tax or legal advice and TRI-AD may not be considered your legal counsel or tax advisor. Clients are encouraged to consult with their tax advisor and/or attorney to determine their legal rights, responsibilities, and liabilities. This includes the interpretation of any statute or regulation, federal, state or local; and/or its application to the clients’ business activities.