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On April 29, 2020, the Employee Benefits Security Administration, Department of Labor, Internal Revenue Service and Department of the Treasury together issued a joint final regulation extending certain time frames under the Employee Retirement Income Security Act and the Internal Revenue Code for group health plans, disability and other welfare plans, pension plans, and benefits and beneficiaries of these plans during the COVID-19 national emergency.

The final regulation recognizes that as a result of the national emergency, participants and beneficiaries covered by these plans may experience problems in exercising their health coverage portability and continuation coverage rights, or in filing or perfecting their benefit claims. The final regulation also recognizes that employers may have trouble meeting certain notice obligations as plan sponsors. The agencies are taking steps to minimize the possibility of individuals losing benefits because of a failure to comply with certain preestablished timelines, as well as the difficulty that affected group health plans may have in complying with certain notice obligations. Accordingly, certain time frames otherwise applicable are extended.

While the concerns identified in the final regulation are certainly true, the extensions raise a number of practical questions and are likely to result in significant administrative and financial burdens on plan sponsors.

Relief for plan participants, beneficiaries, qualified beneficiaries and Claimants

All group health plans, disability and other employee welfare benefit plans and employee pension benefit plans subject to ERISA or the Internal Revenue Code must disregard the outbreak period from March 1, 2020, until 60 days after the announced end of the national emergency for all plan participants, beneficiaries, qualified beneficiaries or claimants in determining the following periods and dates:

The 30-day period to request special enrollment under HIPAA;
The 60-day election period for COBRA continuation coverage;
The date for making COBRA premium payments;
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 a plan's claims procedure;
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 an adverse benefit determination or final internal adverse benefit determination; and
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.

Relief for group health plans

For group health plans and their sponsors and administrators, the outbreak period shall be disregarded when determining the date for providing a COBRA election notice. This is the only relief provided to group health plans in the final regulation and will allow sponsors and administrators to delay the distribution of COBRA election notices during the outbreak period without violating the established COBRA notice periods following a qualifying event. While plan administrators are not required to provide the COBRA election notice during the outbreak period, a plan does have to provide COBRA coverage if a participant elects it. In addition, most plan administrators will want to continue providing timely COBRA election notices in order to encourage qualified beneficiaries to elect and pay for COBRA coverage.

An open question remains as to whether the COBRA election notice itself needs to be revised to reflect the extended deadlines contained in the final regulations. While revisions would typically be expected in light of such significant changes, it should be noted that updated model COBRA notices were published by the DOL on May 1, 2020―two days after the final regulations were issued―and the updated model notice made no reference to the extension. This suggests that employers are not responsible for updating the notices to reflect the extension―or possibly to even notify employees at all. Further guidance on these issues is anticipated.

Examples

The final regulation contains a number of helpful examples to illustrate the required time frame for extensions. All examples have an assumed end date for the national emergency of April 30, 2020, with the outbreak period ending on June 29, 2020 (the 60th day after the end of the national emergency). As the April 30, 2020, date has already passed, the application of these examples in practice will be changed accordingly based on the actual end of the national emergency. Therefore, the dates used below are only example applications of the extensions set forth in the final regulations; the application of the extension itself will depend on when the national emergency designation is actually lifted.

Electing COBRA

Individual A works for Employer X and participates in Employer X's group health plan. Due to the national emergency, Individual A experiences a qualifying event for COBRA purposes as a result of a reduction of hours below the hours necessary to meet the group health plan's eligibility requirements and has no other coverage. Individual A is provided a COBRA election notice on April 1, 2020. Under this example, the outbreak period is disregarded for purposes of determining Individual A's election period. The last day of Individual A's COBRA election period is August 28, 2020 (60 days after June 28, 2020).

Note that the existing time periods applicable to Employer X providing the COBRA election notice itself would also be delayed during the outbreak period―Employer X could provide the COBRA election notice within the 14-day period (44 days if Employer X is also the plan administrator) after June 28, 2020, and still be treated as providing a timely COBRA election notice. However, as outlined above, in order to encourage qualified beneficiaries to timely elect and pay for COBRA coverage, Employer X would be better served to follow its existing procedures and distribute the COBRA election notice soon after the COBRA qualifying event.

COBRA premium payments

On March 1, 2020, Individual B was receiving COBRA continuation coverage under a group health plan. Monthly premium payments are due by the first of the month. Individual B makes a timely February payment, but does not make the March payment or any subsequent payments during the outbreak period. As of July 1, Individual B has made no premium payments for March, April, May or June. Under this example, the outbreak period is disregarded for purposes of determining whether monthly COBRA premium installment payments are timely. Premium payments made by July 29, 2020 (30 days after June 29, 2020), for March, April, May and June 2020 are timely, and Individual B is entitled to COBRA continuation coverage for these months if she makes timely payment. Since the due dates for Individual B's premiums would be postponed and Individual B's payment for premiums would be retroactive during the initial COBRA election period, Individual B's insurer or plan may not deny coverage and may make payments retroactive for benefits and services received by the participant during this time.

COBRA premium payments, example 2

Using the same facts as above, except by July 29, 2020, Individual B made a payment equal to only two months' premiums. Individual B will be entitled to COBRA continuation coverage for March and April of 2020, the two months for which timely premium payments were made, and Individual B will not be entitled to COBRA continuation coverage for any month after April 2020. Benefits and services provided by the group health plan that occurred on or before April 30, 2020, would be covered under the terms of the plan. The plan would not be obligated to cover benefits or services that occurred after April 2020. To the extent Individual B utilized benefits and services after April 2020, Individual B may be personally liable for the costs of those benefits and services due to the fact that the plan will not cover those costs.

HIPAA special enrollment period

Individual C is eligible for, but previously declined participation in, her employer-sponsored group health plan. On March 31, 2020, Individual C gave birth and would like to enroll herself and the child into her employer's plan; however, open enrollment does not begin until November 15. Under this example, the outbreak period is disregarded for purposes of determining Individual C's special enrollment period. Individual C and her child qualify for special enrollment into her employer's plan as early as the date of the child's birth. Individual C may exercise her special enrollment rights for herself and her child into her employer's plan until July 29, 2020 (30 days after June 29, 2020), provided that she pays the premiums for any period of coverage.

Claims for medical treatment under a group health plan

Individual D is a participant in a group health plan. On March 1, 2020, Individual D received medical treatment for a condition covered under the plan, but a claim relating to the medical treatment was not submitted until April 1, 2021. Under the plan, claims must be submitted within 365 days of the participant's receipt of the medical treatment. Under this example, Individual D's claim is treated as timely. For purposes of determining the 365-day period applicable to Individual D's claim, the outbreak period is disregarded. Therefore, Individual D's last day to submit a claim is June 29, 2021 (365 days after June 29, 2020), so Individual D's claim was timely.

Internal appeal

Individual E received a notification of an adverse benefit determination from Individual E's disability plan on January 28, 2020. The notification advised Individual E that there are 180 days within which to file an appeal. When determining the 180-day period within which Individual E's appeal must be filed, the outbreak period is disregarded. Therefore, Individual E's last day to submit an appeal is November 25, 2020 (148 days after June 29, 2020).

Internal appeal, example 2

Individual F received a notice of adverse benefit determination from their 401(k) plan on April 15, 2020. The notification advised Individual F that there are 60 days within which to file an appeal. When determining the 60-day period within which Individual F's appeal must be filed, the outbreak period is disregarded. Therefore, Individual F's last day to submit an appeal is August 28, 2020 (60 days after June 29, 2020).

Outstanding Issues

Significant questions remain regarding the application of the final regulation and the various extensions that it mandates be provided to individuals:

Are employers required to make revisions to the deadlines set forth in their COBRA election notices? Existing COBRA election notices―including the DOL model issued after the final regulation was issued―make no reference to the extensions that are available for electing and paying for COBRA coverage. Guidance is needed to address the employer's obligations to inform employees of these changes, if any.
As individuals will have until the expiration of the outbreak period to elect COBRA coverage, this will potentially result in individuals waiting to see if they incur claims before electing COBRA. This rise in "adverse selection" could have significant impact on employers and their group health plans.
As COBRA participants may wait to pay for coverage until the outbreak period ends, there could significant financial burdens on employers who have already paid for benefits and, for insured plans, possibly paid the premiums to the insurer. The ability to recoup those payments if COBRA coverage is not ultimately paid for by the individual is unclear.
The financial impact on individuals is also potentially significant, as it may be difficult for employers to collect the many months of accumulated premium payments. Additional guidance regarding the ability to suspend coverage due to nonpayment is necessary, as well as any affirmative obligations that employers have to identify and reach out to participants who have failed to make a payment to alert them of this extension.

While the final regulation applies broadly to all ERISA-covered plans and programs, it will have its most immediate effect on COBRA notices and elections. The final regulation imposes new rules that employers should work with their COBRA administrators and outside legal counsel to manage and prepare for. The lengthy period of time that qualified beneficiaries will have to elect COBRA coverage will likely result in qualified beneficiaries waiting out their COBRA election period to see if a health condition develops. This could have significant ramifications in terms of costs for the employer and its health plan.

As we await further guidance, employers should begin to work through the potential impact and, in light of the March 1, 2020, retroactive effective date, identify any individuals who may have previously been deemed to have lost their ability to elect COBRA or file a claim for benefits, but would now be able to do so under the final regulation's extensions. Author Information:

Timothy B. Collins, partner at Duane Morris, focuses his practice on all aspects of employee benefits and executive compensation. Mr. Collins' practice runs the full gamut of the tax and ERISA aspects of tax-qualified retirement plans; equity awards, such as stock options, SARs and restricted stock; nonqualified deferred compensation and SERPs under Code Section 409A; executive employment agreements, golden parachutes and other change in control arrangements; severance contracts; performance bonus and incentive plans; excess benefit and top hat plans and the like.

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