We recently provided an update on the looming end date for COBRA and other deadline extensions and the uncertainty that continues to add to the administrative burdens without more clarity from the DOL and IRS. Message received, apparently.
On behalf of the IRS, the DOL has now released Disaster Relief Notice 2021-01 that attempts to resolve a potential conflict with other statutory guidance under ERISA Section 518 and Code Section 7508A, which technically limits the allowable deadline extension period to a maximum of one year. Unfortunately, this now results in new deadlines that can apply immediately and will differ based on individual events. Fortunately, the DOL recognizes this will be complicated and burdensome to many so they also offer welcomed commentary that will provide relief to employers and plan administrators who take reasonable steps to comply.
Under the new guidance, COBRA, HIPAA Special Enrollment, claims and appeals timeframes, and other applicable deadlines that were previously extended indefinitely are now subject to a deadline that ends as of the earlier of: (1) one year from the date the deadline would have occurred on or after March 1, 2020, absent the previous extension guidance, or (2) the end of the Outbreak Period as previously defined. The Notice provides a helpful example: if a qualified beneficiary would have originally been required to make a COBRA election to continue health insurance coverage by March 1, 2020, that person now technically will need to have made this election by March 1, 2021. If the individual was to have made an election (or COBRA payment) by May 15, 2020, they will still have until May 15, 2021, (provided the Outbreak Period has not ended). If that individual was recently terminated and ordinarily (by statute) would be required to make a COBRA election by April 1, 2021, that person will still have the ability to defer the election until the end of the Outbreak Period (or April 1, 2022, if that were to come first). Employers have the same rolling 1-year maximum period to issue any required notifications.
The Notice also provides in part, “plan fiduciaries should make reasonable accommodations to prevent the loss or undue delay in payment of benefits…and should take steps to minimize the possibility of individuals losing benefits because of a failure to comply with pre-established time frames.” This opens up the possibility for additional extensions of deadlines where facts and circumstances would argue for additional flexibility. The Notice helpfully notes that enforcement “will be marked with an emphasis on compliance assistance and includes grace periods and other relief”, as long as the plan administrators and other “fiduciaries…have acted in good faith and with reasonable diligence under the circumstances.”
What This Means to Employers and Plan Administrators
While the above language from the Notice acknowledges that the agencies understand and appreciate the complications this latest guidance creates for plan administrators to immediately restart the clock of daily COBRA, HIPAA, and other deadlines and for individuals who now must immediately catch up monthly COBRA premium obligations to maintain health insurance under the employer’s plan, the reality is that plan sponsors need to address administrative compliance with all deadlines now.
Plan sponsors should discuss next steps with counsel and third-party administrators to weigh all options and obligations. To be considered as acting in “good faith and with reasonable diligence,” we recommend following these steps:
- Contact all COBRA and other third-party administrators to execute a plan of action for notification to all existing and COBRA eligible individuals regarding any applicable deadlines.
- For individuals who have deferred making a COBRA election for any periods on or after March 1, 2020, consider whether new notices should be issued with updated coverage and rate options, and current election and payment deadlines. Consider starting the deadlines from the date that notice is mailed so the individual has a fair opportunity to evaluate the need for coverage.
- For those who are already enrolled in COBRA but who have been deferring payment for coverage, provide initial notice and demand payment of all prior months’ premiums that may be owing. Where this involves many months, consider providing a period over which such individuals can make installment payments with a “grace period” for full and complete payment before COBRA coverage terminates.
- Establish and communicate claims run-out periods for Flexible Spending Accounts and other applicable benefits.
- Consider additional communications reminding all affected individuals of the availability of coverage via healthcare.gov, which may be a less expensive option for many and does not require retroactive enrollment to the date coverage was lost as required under COBRA.