Agencies Issue Needed Guidance on COBRA Elections During the COVID-19 “Outbreak Period”
On February 26, 2021, the Department of Labor’s Employee Benefits Security Administration (EBSA) issued Notice 2021-01 (the “Notice”). The Notice was issued jointly with the Department of the Treasury, the Internal Revenue Service and the Department of Health and Human Services (the “Departments”). Entitled “Guidance on Continuation of Relief for Employee Benefit Plans and Plan Participants and Beneficiaries Due to the COVID-19 (Novel Coronavirus) Outbreak,” the Notice provides much needed guidance to group health plan sponsors on (among other things) when COBRA notice and election periods, which had been previously extended [in May 2020], will come to an end. This guidance was necessary because earlier regulatory relief extending COBRA notice and election periods was about to expire as a result of a statutory deadline.
This post explains the impact of the Notice on sponsors of group health plans. Spoiler alert: With the issuance of the Notice, the Departments have selected an interpretation that, while consistent with applicable law and solicitous of the needs of plan participants and beneficiaries, is also administratively burdensome. Under the Notice, the period during which certain requirements are tolled is determine on an individual basis.
Background
In March of last year, then President Trump issued the Proclamation on Declaring a National Emergency Concerning the Novel Coronavirus Disease (COVID-19) Outbreak. The President also made a determination that, effective March 1, 2020, the COVID-19 outbreak constituted a national emergency under Section 501(b) of the Robert T. Stafford Disaster Relief and Emergency Assistance Act.
On May 4, 2020, EBSA issued Notice 2020-01 (also issued jointly with the Departments), which provided relief for certain actions related to employee benefit plans required or permitted under ERISA and the Internal Revenue Code. In particular, Notice 2020-01 required plan sponsors, starting March 1, 2020, to toll certain deadlines during the COVID-19 National Emergency period plus an additional 60-day period (the “Outbreak Period”). The effected deadlines included: (1) COBRA participant elections; (2) the payment of COBRA premiums; (3) elections of HIPAA special enrollment rights; (4) filing claims, appeals, and requests for external review; and (5) the furnishing of COBRA election notices.
In a footnote, Notice 2020-01 recognized that both ERISA §518 and the Code §7508A limit the power of the Labor and Treasury Departments to toll deadlines to a maximum of one year. In this instance, the period was tolled from March 1, 2020 to February 28, 2021.
Relief under the Notice
Noting that “stakeholders have inquired about the continuation of relief” beyond February 28, 2021, the Notice provides the “[i]ndividuals and plans with timeframes that are subject to the relief under the Notices will have the applicable periods under the Notices disregarded until the earlier of:
- 1 year from the date they were first eligible for relief, or
- 60 days after the [ ] end of the Outbreak Period.”
From and after that date, the Notice explains that “the timeframes for individuals and plans with periods that were previously disregarded under the Notices will resume. In no case will a disregarded period exceed 1 year.” There follows a handful of examples that make clear how the Departments intend their relief to work, such as:
- A qualified beneficiary who would have been required to make a COBRA election by March 1, 2020 has until February 28, 2021, which is the earlier of 1 year from March 1, 2020 or the end of the Outbreak Period (which remains ongoing).
- A qualified beneficiary who would have been required to make a COBRA election by March 1, 2021, need not make his or her election until the earlier of 1 year from that date (i.e., March 1, 2022) or the end of the Outbreak Period.
To be clear: the determination is made on a participant-by-participant basis with each participant having his or her own tolling period.
Reasonable Accommodation
Observing that “affected plan participants and beneficiaries may continue to encounter an array of problems due to the ongoing nature of the COVID-19 pandemic,” the Notice offers the prospect of further relief, but subject to some “guiding principles.” Specifically, to qualify, plan sponsors must:
“[A]ct reasonably, prudently, and in the interest of the workers and their families who rely on their health, retirement, and other employee benefit plans for their physical and economic well-being.”
Among other things, this requires plans to “make reasonable accommodations to prevent the loss of or undue delay in payment of benefits in such cases and should take steps to minimize the possibility of individuals losing benefits because of a failure to comply with pre-established time frames.” All of these actions are consistent with the standards that ERISA imposes on fiduciaries. We can discern nothing in the Notice to suggest that the Department of Labor is adding new, substantive ERISA fiduciary duties. Regrettably, however, it strikes us that the Notice could be read to that effect. One hopes, of course, that plan sponsors that follow good fiduciary hygiene will not find themselves subject to penalties for unavoidable or inadvertent lapses.
Participant Notices
Where the plan administrator knows, or should reasonably know, that the end of the relief period for an individual action is exposing a participant or beneficiary to a risk of losing benefits, the administrator is admonished under the Notice to provide notice regarding the end of the relief period. This means that plan disclosures issued prior to or during the pandemic may need to be reissued or amended.
The Notice goes on to suggest that plans should consider ways to ensure that participants and beneficiaries who are losing coverage under their group health plans are made aware of other coverage options that may be available to them, e.g., through a state exchange or market place.
Finally, the Notice acknowledges that there may be instances when full and timely compliance with ERISA’s disclosure and claims processing requirements by plans and service providers may not be possible. The Notice makes clear that the Department of Labor’s approach in these instances will be influenced by whether a “fiduciary has acted in good faith and with reasonable diligence under the circumstances.”
Conclusion
The Notice leaves employers and other plan sponsors with a good deal to unpack. While individual tolling periods will present third-party record-keepers, COBRA administrators and other service providers with enormous challenges, the Notice at least provides a bright line test. The rules governing participant accommodations and notices continue to present a tricky compliance challenge.