Plan sponsors and plan fiduciaries, and vendors, advisors and other service providers: Take notice! The end of the special COVID-19 “Outbreak Period,” which began on March 1, 2020 and continues to apply, is nowhere in sight based on recent guidance from the Department of Labor (DOL) in the form of a Disaster Relief Notice (New Guidance).
This means that the “tolling” of a number of participant and plan deadlines did not end on February 28, 2021, as most plan sponsors and others had assumed based on prior guidance. In fact, for some participants, the tolling period could extend far out into the future. In addition, the new guidance reminds plan sponsors and plan fiduciaries of the “guiding principle” for administering employee benefit plans – act reasonably, prudently and in the interest of workers and their families. Good faith compliance with the new guidance will likely be judged on this standard.
Pursuant to joint guidance issued on May 4, 2020 (Joint Guidance), the DOL and Internal Revenue Service (IRS) suspended or “tolled” a number of participant and plan deadlines. The “tolled” deadlines include:
- HIPAA Special Enrollment Notice Obligations – the 30-day period (or 60-day period, as applicable) to request special enrollment in a group health plan.
- COBRA Notices, Elections and Premium Payments – the periods for individuals to notify the plan of certain COBRA events (e.g., a qualifying event, such as a divorce or child losing eligibility), the 60-day period for electing COBRA continuation coverage, and the 45-day (initial) and 30-day (monthly) deadlines for making COBRA premium payments.
- Claims and Appeal Procedures – the date by which an individual may file a claim for benefits or an appeal of an adverse benefit determination (this applies to all ERISA-both welfare and retirement-plans).
Under the Joint Guidance, the deadlines were “tolled” for a period of time called the “Outbreak Period.” Based on the Joint Guidance, the “Outbreak Period” was defined as the period beginning on March 1, 2020 (the first day of the COVID-19 National Emergency) and extending to 60 days after the announced end of the COVID-19 National Emergency. However, due to the statutory provisions of ERISA and the Internal Revenue Code, neither the DOL nor IRS had the authority to suspend the “tolled” deadlines for more than one year. Thus, most plan sponsors and plan fiduciaries reasonably assumed that the last day of the “Outbreak Period” and, therefore, tolling period, for all purposes had to be February 28, 2021 (one year from March 1, 2020), even if the COVID-19 National Emergency was still ongoing.
EBSA Disaster Relief Notice 2021-01 (New guidance)
The DOL’s new guidance, released on February 26, 2021 (with just two days to spare) clarifies the duration of the “tolling” (or, “disregarded,” in the DOL’s parlance) period. Now, the disregarded period is defined as the earlier of (1) one year from the date the individual was first eligible for relief under the Joint Guidance (on or after March 1, 2020), or (2) 60 days after the announced end to the COVID-19 National Emergency (the end of the Outbreak Period). Thus, the disregarded period does not necessarily begin on March 1, 2020 for each participant, but instead is a rolling period of time of up to one year that is applied on an individual-by-individual basis.
This means, for example, that if a COBRA qualified beneficiary would have been required to make an election by June 1, 2020, the time period for making that election is tolled until June 1, 2021, unless the Outbreak Period (the National Emergency plus 60 days) ends earlier. Under the new guidance, each plan participant and beneficiary will be entitled to his or her own, separate tolling (disregarded) period of one year subject only to a uniform, early termination based on the end of the National Emergency.
Since the Joint Guidance was issued, there has been little guidance from the DOL and IRS on a plan sponsor’s or plan fiduciary’s obligations during the tolling period, other than a good faith compliance standard. However, in the new guidance, the DOL suggests a number of actions that plan sponsors and plan fiduciaries should consider due to the ongoing nature of the COVID-19 pandemic. For example, the DOL expects plan fiduciaries to make “reasonable accommodations” to prevent the loss of or undue delay in payment of benefits and directs the plan fiduciaries to take steps to minimize the possibility of individuals losing benefits because of a failure to comply with the otherwise tolled plan and participant deadlines.
Without providing any definitive guidance as to what is meant by “reasonable accommodations,” the DOL suggests that the plan fiduciaries should consider sending a notice to each participant regarding the end of that participant’s relief period, especially if it appears that a relief deadline might be missed by the participant. Other suggested actions include reissuing prior notices to the participants if such notices failed to provide accurate information regarding the duration of the tolling period under the new guidance (which is almost a certainty). Each participant should also be made aware of other coverage options that might be available to that participant, such as the COVID-19-related special enrollment period under the Health Insurance Marketplace, which ends on May 15, 2021.
Compliance with the new guidance and DOL fiduciary “suggestions” will be complex and administratively burdensome on plan sponsors and plan fiduciaries. The facts and circumstances of each individual participant must be assessed in order to determine the tolling period applicable to that participant. Specific attention should be given to participants with imminent deadlines and plan fiduciaries must be prepared to take reasonable and prudent steps to protect participants from the loss of a benefit or right under the plan (for example, care should be taken before depriving someone of a COBRA continuation right or declining a special enrollment request).
The DOL suggestions included in the new guidance may be viewed as a minimum standard of care, which, if ignored, will be factors in determining if the plan sponsor and plan fiduciaries acted in good faith and “in the interest of the workers and their families.” If plan fiduciaries can demonstrate that they acted in good faith and with reasonable diligence under the circumstances, “the [DOL’s] approach to enforcement will be marked by an emphasis on compliance assistance and includes grace periods and other relief.”
Plan sponsors will need to contact their counsel and benefit vendors, advisors and other service providers with respect to the new guidance to determine a prudent and reasonable course for compliance. At a minimum, prior communications to participants with respect to the COVID-19 tolling period and deadlines for participant notices and elections must be reviewed and revised (or supplemented) if inconsistent with the new guidance. Plan sponsors and plan fiduciaries should aim for a well thought out, robust communication game plan, which may include timely reminder notices, to meet the DOL’s expectations as outlined in the new guidance.
Reprinted with permission from the March 17 issue of BenefitsPRO. © 2021 ALM Media Properties, LLC. Further duplication without permission is prohibited. All rights reserved.