COVID-19: Agencies Issue Disaster Relief for Welfare Plans

The US Department of Labor’s Employee Benefits Security Administration (DOL) and the Internal Revenue Service (IRS) issued guidance last week providing deadline and other relief affecting welfare plans and their sponsors and administrators under the Employee Retirement Income Security Act of 1974, as amended (ERISA) and the Internal Revenue Code of 1986, as amended (Code).

The guidance included EBSA Notice 2020-01 that extends the time for plan officials to furnish benefits statements and other disclosures required under ERISA and a joint final rule that extends certain time frames affecting a participant’s right to healthcare coverage, portability and continuation of group health plan coverage under COBRA after employment ends. These two pieces of guidance are described below. In addition, the DOL issued a set of Frequently Asked Questions (FAQs) directed to help participants and beneficiaries impacted by the coronavirus (COVID-19) understand their rights under ERISA. While these FAQs are directed to participants, they include informative guidance for plan sponsors and employers as well.

EBSA Disaster Relief Notice 2020-01 (EBSA Notice 2020-01)

The relief provided under EBSA Notice 2020-01 applies retroactively from March 1, 2020, the beginning of the COVID-19 national emergency declared by President Donald Trump, until 60 days after the announcement of the end of the national emergency or such other date as the DOL determines. Below is a summary of the significant topics addressed by EBSA Notice 2020-01 and the accompanying FAQs as they relate to welfare plans:

• Deadline Extension for Disclosures and Documents Required by Title I of ERISA.The EBSA Notice provides for an extension of deadlines for furnishing required notices or disclosures to plan participants, beneficiaries, and other persons so that plan fiduciaries and plan sponsors have additional time to meet their obligations under Title I of ERISA. This extension only applies to documents required by provisions of Title I of ERISA over which the DOL has interpretative and regulatory authority, except for notices and disclosures addressed in the DOL and IRS Final Rule described below.

Common notices and disclosures required by Title I of ERISA and that come within the scope of the relief provided by EBSA Notice 2020-01 include:

• Summary Plan Descriptions
• Summaries of Material Modifications
• Summaries of Benefits and Coverage
• Summary Annual Reports
• COBRA Notices
• Medicare Part D Notices
• Medicaid/CHIP Notices
• Special Enrollment Rights Notices
• Women’s Health and Cancer Rights Act Notices

An employee benefit plan and the responsible fiduciary will not be in violation of ERISA for a failure to timely furnish a notice, disclosure, or document that must be furnished between March 1, 2020, and 60 days after the announced end of the COVID-19 national emergency, if the plan and responsible fiduciary “act in good faith and furnish the notice, disclosure or document as soon as administratively practicable under the circumstances.” Good faith acts include the use of electronic communications with plan participants and beneficiaries who the plan fiduciary reasonably believes have effective access to electronic means of communication, including “email, text messages, and continuous access websites.” This is a significant expansion on the ability of plan administrators to use electronic media to issue participant communications. It remains to be seen if this position demonstrates a willingness to loosen the restrictions currently applicable to welfare plans.

• DOL Enforcement Will Emphasize Compliance Assistance, Grace Periods, and Other Relief.The new guidance provides that the DOL’s approach to enforcement will emphasize compliance assistance and include grace periods and other relief where appropriate, including when physical disruption to a plan or service provider’s place of business makes compliance with pre-established timeframes for certain claims’ decisions or disclosures impossible.

DOL and IRS Extension of Certain Timeframes for Employee Benefit Plans (Final Rule)

The Final Rule addresses two primary areas: (1) timeframes impacting participants and beneficiaries; and (2) timeframes impacting plan sponsors and plan administrators.

• Relief for Participants and Beneficiaries. All welfare benefit plans subject to ERISA or the Code must disregard the period from March 1, 2020 until 60 days after the announced end of the national emergency or such other date announced by the agencies in a future notice in determining the following periods and dates:

• The 30-day period (or 60-day period, if applicable) to request special enrollment[1]
• The 60-day election period for COBRA continuation coverage
• The date for making COBRA premium payments[2]
• The date for individuals to notify the plan of a qualifying event or determination of disability
• The date within which individuals may file a benefit claim under the plan’s claims procedure[3]
• The date within which claimants may file an appeal of an adverse benefit determination under the plan’s claims procedure
• The date within which claimants may file a request for an external review after receipt of a final internal adverse benefit determination
• 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 applicable appeal rules

• Relief for Plan Sponsors and Plan Administrators.The Final Rule also provides that the period from March 1, 2020 until 60 days after the announced end of the national emergency (or such other date announced by the Agencies in a future notice) is to be disregarded when determining the date on which a COBRA election notice must be given once there has been a COBRA qualifying event. Because the COBRA election period generally ends 60 days after notice is give, plan administrators should still endeavor to get notices out sooner rather than later so that qualified beneficiaries will need to make elections as soon as the extended deadline is reached, which may reduce the likelihood of adverse selection that could occur if qualified beneficiaries still had 60 days after the exended deadline to decide whether to elect COBRA coverage. 

• Delayed Form M-1 Filing Deadline. The Form M-1 (MEWA Reporting Form) filing deadline is pushed back to July 15 in accordance with prior Form 5500 relief issued by the IRS. The DOL and the prior Form 5500 relief have thus far failed to extend the due date for the 2019 Form 5500 filings for calendar year plans. Under the prior Form 5500 filing relief, the due date to file a Form 5500 that is otherwise due between April 1, 2020 and July 14, 2020, has been extended to July 15, 2020; however, since the 2019 Form 5500 filing deadline for a calendar plan falls on July 31, 2020, the due date for calendar year plans has not been extended at this point.

The Final Rule does not address what action, if any, a plan sponsor must take to notify participants and beneficiaries of the extension of deadlines noted above.  Furthermore, the extension of the deadlines creates potentially significant administrative and financial burdens on the plan sponsor particularly given the uncertainly of when the period national emergency will expire. 

The broad relief provided by these notices, however, is a welcome development for plan fiduciaries that may be struggling to satisfy their disclosure or notice obligations during the COVID-19 crisis. Personnel must keep in mind that the relief does not extend the compliance deadlines indefinitely. Rather, the DOL generally expects plan fiduciaries to make good faith efforts to comply with their legal requirements as soon as administratively practicable under the circumstances. As these circumstances are likely to be second-guessed in the years following the end of the current crisis, plan administrators might consider documenting the reasons for any delays, the good faith efforts that are undertaken to comply, and the circumstances giving rise to the compliance occurring as soon as administratively practicable.