We have prepared responses to frequently asked questions from employers regarding the following guidance issued by EBSA and the IRS:
Disaster Relief Notice 2020-01 issued by EBSA on April 29, 2020
Notification of Relief and Extension of Timeframes (NRET) jointly issued by EBSA and IRS on April 29, and effective May 4, 2020 (NRET)
Notice 2020-29 issued by IRS on May 12, 2020
Notice 2020-33 also issued by IRS on May 12, 2020
As a reminder, Alight is not a law firm and does not give legal or tax advice. This information is not a substitute for legal advice applicable to an employer’s specific situations and plans. We suggest employers consult with their legal counsel for guidance. Employers should also discuss any plan changes with their insurance carriers and/or exchange consultant.
Under the NRET, the extension of HIPAA, COBRA, and other deadlines for participants to take certain actions or pay premiums are generally required for all private sector employers. State and local governmental plans (called “non-federal governmental plans”) are encouraged to adopt similar flexibility to the extent possible and the published guidance includes representations related to Health and Human Services (HHS) policies that would accommodate such action(s).
The NRET’s deadline suspension for plans to provide COBRA election notices to qualified beneficiaries is not required. In most cases we expect plans to send the COBRA notices to the extent they are able to stay current in order to help avoid a backlog and possibly missing deadlines once they resume.
The additional flexibility or features in Notice 2020-01, Notice 2020-29, and Notice 2020-33 are optional for employers to utilize or make available.
The Outbreak Period is based on the duration of the National Emergency that started on March 1, 2020. Since the end date of the National Emergency has not yet been determined, the full duration of the applicable extensions are not yet known.
For all questions of plan amendments and updates/supplements to other plan documentation, we suggest employers check with their legal counsel to ensure appropriate and timely changes are made.
Notice 2020-01. Except if the plan documents or materials include specific timing references for the plan’s action, additional flexibility and time for plans to provide otherwise required notices and disclosures may not require plan amendments or other updates. If the employer is going to use any of the relief in this Notice, they should check with their legal counsel to help ensure they meet the applicable good faith standard.
NRET. Although the extensions are temporary, employers may need to amend their plan and update or supplement other plan documents (e.g., SPD, SMM) at least by reference to the applicable guidance or by explicitly adopting a temporary timeline. Any amendments/updates will likely lag the process, but it appears the general ERISA timelines for updating SPDs and providing SMMs remain applicable.
Notice 2020-29. For plans adopting changes allowed by this notice, plan amendments must be made by December 31, 2021, and other plan materials may need to be updated accordingly. However, participants will need to be notified of the changes in order to make use of them during the emergency period.
Notice 2020-33. For plans adopting the healthcare flexible spending account (FSA) indexing or the ICHRA reimbursement triggers, the plan must be amended by the end of the plan year for which the change is effective. For calendar year plans, making the changes for this year (2020), the deadline would be by December 31, 2020. Again, participants will need to be notified of the changes as soon as possible in order to help them use them during the year.
Does the premium payment extension change the effective date of COBRA coverage if the COBRA enrollees don’t pay COBRA premiums until the extended deadline?
No. COBRA coverage must be effective-dated retroactively to the first date the COBRA qualified beneficiary is eligible for COBRA coverage, even if COBRA premiums are not paid until after the end of the Outbreak Period (See below for retroactive termination of coverage if premiums are not paid by extended deadline).
No. The guidance only provides COBRA qualified beneficiaries with additional time to enroll in COBRA coverage, make premium payments, and provide notice of certain qualifying events. The actual COBRA benefit period is not extended.
The required additional time in the NRET only applies to the specifically identified instances for COBRA, HIPAA, claims and appeals, and as otherwise listed.
IRS Notice 2020-29 provides other options for employers to allow additional Section 125 cafeteria plan changes on a voluntary basis.
Will insurance carriers accept HIPAA special enrollments and COBRA enrollments that are effective dated more than 60 or 90 days retroactive?
In general, it’s expected that carriers will be required to accept these enrollments, however, employers should consult with their insurance carriers to determine how carriers will handle these enrollments per the guidance.
Will the insurance carriers accept claims and appeals, and requests for external review beyond the otherwise applicable deadlines?
Similar to enrollments, it’s expected that carriers will be required to accommodate these extended periods, but employers should consult with the insurance carriers to ensure that appropriate processes are extended. Employers that have recently changed carriers should check with the previous carrier to confirm the process for submitting run-out claims from the policy/coverage year extended to, or beyond March 1, 2020 in order to ensure that the extension is in-place and that participants know how to utilize the extended claims procedures for the prior carrier.
Does the extension to pay for benefits apply to all participants being billed for coverage, including employees on leave of absence or retirees, or only to COBRA qualified beneficiaries?
The premium payment extension only applies to COBRA enrollees; it does not apply to other non-COBRA participants being directly billed for coverage such as employees on leave of absence, employees on a temporary furlough, or retirees. However, employers may voluntarily consider such changes.
Does the extension to pay premiums apply to only existing COBRA enrollees or also new COBRA enrollments?
The premium payment extension applies to all COBRA enrollees who have a premium payment due date that falls within the Outbreak Period (March 1, 2020 through the National Emergency end date plus 60 days). This includes people who are currently enrolled in COBRA and any new COBRA enrollees during this time period.
If participants were on COBRA prior to March 1, 2020, would we be required to provide them with additional time to pay for COBRA premiums due before March 1?
The premium payment extension is based on the due date of the COBRA premium. As long as the COBRA premium due date is within the Outbreak Period (March 1, 2020 through the National Emergency end date plus 60 days), the extension applies, even if the premium due is for COBRA coverage effective prior to March 1.
If the COBRA premium due date (including any plan/statutory grace period for the payment) elapsed before March 1, 2020, then the due date is not extended and the plan may treat the coverage as it normally would have in such a situation.
If a participant cannot make their May 2020 COBRA premium payment on time, do they now have until after the end of the Outbreak Period to pay for it? And would COBRA benefits be suspended until payment is received?
The premium payment extension is based on the due date of the COBRA premium. Assuming the due date for the May 2020 premium is within the Outbreak Period (March 1, 2020 through the National Emergency end date plus 60 days), then yes, the COBRA enrollee would have additional time to pay the premium.
The guidance indicates that COBRA “coverage” cannot be terminated for nonpayment during this time, however, it appears, the plan will ultimately only be required to pay claims incurred during months for which COBRA premiums are actually received on or before the extended due date. Employers should consult with their insurance carriers to determine how claims will be handled during this time period for COBRA enrollees that have not paid their COBRA premium.
Does the employer need to continue paying the COBRA premium to the carrier(s) although the COBRA participant did not pay their COBRA premium to the employer?
The guidance does not directly address this or appear to require that employers pay COBRA premiums to the insurance carrier(s) if the COBRA enrollee has not yet remitted their premium.
How many months do we have to allow COBRA enrollees to be “covered” but not pay for coverage? Could it be as many as 3-6 months or more depending upon the end of the National Emergency plus 60 days?
Since the end date of the National Emergency has not yet been determined, the total number of months of the premium payment extension is not yet known. Given that the Outbreak Period started on March 1, it is quite possible some people will have COBRA payment due date extensions of four or more months by the time the Outbreak Period (which is the National Emergency period plus 60 days) is complete and the remaining payment period elapses.
Do employers have any obligation to offer a payment plan for retroactive premiums due after the extended enrollment and payment deadlines expire?
No. The guidance does not require employers to offer an alternative payment plan, only to give individuals additional time to pay the premiums.
If the COBRA enrollee has a premium due date that falls within the Outbreak Period (March 1, 2020 through the National Emergency end date plus 60 days), COBRA coverage cannot be terminated until the remaining number of days of the payment period have elapsed (e.g., 30 or 45 days for ongoing or initial COBRA grace periods, respectively) after the end of the Outbreak Period.
If the COBRA enrollee does not pay the entire required premium accrued by the extended deadline, then coverage may be retroactively cancelled (and claims not paid) commensurate with the “paid-through” date, i.e., the number of consecutive months’ premium that was paid. For example, if someone owes for six months of COBRA coverage by the end of the extension, but only pays for two, then the COBRA continuation coverage for the first two months of the period would be effective (and claims incurred in those months would be paid). The remaining four months may be retroactively terminated for non-payment.
Can we advise our insurance carrier(s) not to pay any claims until a COBRA enrollee pays their premiums?
The guidance indicates that COBRA “coverage” cannot be terminated for nonpayment during this time. However, it appears, the plan will ultimately only be required to pay claims incurred during months for which COBRA premiums are actually received on or before the extended due date. Employers should consult with their insurance carriers to determine how claims will be handled during this time period for COBRA enrollees that have not paid their COBRA premium.
Does the extended deadline for submitting claims and appeals apply to dependent care flexible spending account plans?
Generally not. The extended deadline for submitting claims and appeals applies to ERISA pension, retirement, health, disability, and other welfare plans. For account-based plans, this includes healthcare flexible spending accounts and health reimbursement arrangements. In most cases, it will not apply to dependent care spending accounts.
No. There are no claim submission “deadlines” for health savings accounts. Participants can request a reimbursement from their HSA at any time for expenses incurred after the HSA account was opened.
The NRET does not permit this. This guidance only provides participants with additional time to submit claims for reimbursement. It does not change the coverage period―the time period during which claims must be incurred.
However, in separate guidance, IRS Notice 2020-29 does allow healthcare FSA plans with grace periods or plan years ending in 2020 to extend their claims incurred period thru 12/31/2020. This is not mandatory, but would effectively extend the use of 2019 plan year healthcare FSA money to cover 2020 incurred claims (beyond any otherwise applicable grace period).
If participants had until March 31, 2020 to submit claims for the 2019 healthcare FSA plan year, should participants be given additional time to submit claims incurred during 2019?
Yes. Since the original deadline to submit claims (March 31, 2020) falls within the Outbreak Period, participants will be afforded additional time to submit claims incurred for 2019.
The HIPAA special enrollment extension applies to HIPAA special enrollment events:
Loss of eligibility for group health coverage or health insurance coverage
Becoming eligible for state premium assistance subsidy, including SCHIP and Medicaid
Adding a new spouse or dependent by marriage, birth, adoption, or placement for adoption
For a HIPAA special enrollment made during the extended period, would that be prospective or retroactive?
The Outbreak Period extension is generally described as “disregarded” for the purpose of the otherwise applicable time limit on the election. Plans should confer with their counsel about how to apply the effective date of the election, once made.
Does the extension for HIPAA special enrollment apply to new hires that did not enroll in benefits during their 30-day new hire enrollment window?
No. The HIPAA special enrollment extension only applies to HIPAA special enrollment events. New hire enrollment is not a HIPAA special enrollment event. (See above Q&A for more details.)
Does the enrollment extension apply to any other qualified changes in status enrollment that are not HIPAA special enrollment events?
The guidance extends the time period for notification of a COBRA qualifying event, COBRA coverage election and HIPAA special enrollment; it does not extend the enrollment window for new hire enrollment or other Section 125 qualified status changes.
Employers may consider voluntarily extending enrollment deadlines to new hires, or based on guidance provided in IRS Notice 2020-29, allowing additional Section 125 cafeteria plan changes on a voluntary basis. Employers considering extending the enrollment deadlines or making other Section 125 cafeteria plan changes, should first discuss this approach with legal counsel and insurance carriers, including stop-loss insurers for self-insured plans.
We currently require participants to submit documentation within 60 days for any dependent added to coverage. Should this window be extended?
The guidance does not require employers to provide additional time for participants to provide documentation once a dependent is added to coverage. Employers may choose to continue or change existing documentation requirements and timelines. Given the unusual circumstances around COVID-19, Alight has seen some employers either temporarily suspend documentation requirements or provide additional time to submit documentation.
If we allow FSA changes under 2020-29, can we only allow the participant to decrease their election to the amount they've had deducted from their paychecks year-to-date?
The additional flexibility provided in Notice 2020-29 is the maximum the plan is permitted to allow. It is our understanding that plans may more narrowly tailor any election change opportunities they offer to employees, including restricting FSA changes to amounts already deducted from paycheck. It is expected that any reduction of healthcare FSA elections may commonly be limited to claim amounts already paid year-to-date under the universal coverage rule at the time of the election change in order to avoid a contribution shortfall for the amount the employer has already paid out.
Has there been any consideration of changing the Flex Discrimination rules for 2020 if we allow changes to contributions for the year?
We are unaware of any proposed or issued guidance related to discrimination testing for 2020, however, we will continue to monitor agency actions. Plans may wish to consult with their plan design consultants or legal counsel about limiting permitted changes in ways that could mitigate possible testing issues.
Questions about employer flexibility permitted under the guidance:
For employers that consider permitting additional Section 125 cafeteria plan election changes, can the employee randomly pick their effective date?
Under the additional Section 125 cafeteria plan guidance, can an employer allow new enrollments, but not permit plan to plan changes?
Can employers allow new Section 125 cafeteria plan elections for only the healthcare FSA and the dependent care FSA account and not medical plan enrollments?
Can employers limit the length of time they open this up to allow election changes, e.g., must be requested by 6/30/2020?
The additional flexibility provided in Notice 2020-29 is the maximum the plan is permitted to allow. It is our understanding that plans may more narrowly tailor any election change opportunities they offer to employees. In practice, this may mean many things, including among others:
Plans opening election change “windows” versus at any time in the period
Limiting the types or effective dates of such changes
Who can make changes (e.g., allow new enrollees only, or only allow employees to change who are currently covered)
Allowing changes to certain plans but not others. Note: Alight has seen strong interest from many employers interested in allowing changes to healthcare and dependent care FSAs. Employer interest in allowing changes to other plans, like the medical plan, has thus far been mixed as many employers are still considering options and the down-stream impacts of allowing those changes.
Employers should bear-in-mind “adverse selection” risks in allowing some or all of these changes so that they may avoid people changing their elections throughout the year to suit their evolving needs and avoiding paying premiums when they aren’t using the coverage. Employers with insured plans (or self-insured plans with stop-loss coverage) will want to discuss any potential changes with the applicable carrier(s) prior to adopting them in order to ensure that the carrier will accept the enrollment change given the insurance policy terms.
We also recommend that employers discuss any changes with legal counsel, plan consultants, and benefits record keepers before making any changes.
If the employer allows midyear election changes to the medical plan under the new Section 125 cafeteria plan guidance and the participant chooses to move from a higher cost, lower deductible plan to a lower cost, higher deductible plan, (e.g., non-HSA plan to an HSA-eligible plan) how would claims be impacted? Is there any guidance on this situation?
We are not aware of guidance directly on this type of election change (if permitted by the employer). In general, the coverage periods for each level of coverage would be expected to apply to claims incurred during each period, respectively. Along with the general issue of whether an insurance carrier (or stop-loss carrier for self-insured plans) will permit additional Section 125 election changes generally, employers will want to confirm whether prospective coverage would be granted “credit” for any amount of deductible paid under the prior coverage level with the applicable carrier and legal counsel.
Is the permitted healthcare FSA carryover limit of 20% of the applicable healthcare FSA contribution limit for that year based on the IRS limit or the employer’s plan limit? For example, our plan only allows $2700 for 2020.
The healthcare FSA indexed carryover limit is based on the IRS-issued annual healthcare FSA contribution amount. However, like the healthcare FSA contribution limit itself; the amount of the carryover may be limited to some amount less than the maximum permitted. It’s our understanding the plan may choose to keep the carryover based on 20% of the plan’s healthcare FSA contribution limit to maintain that 20% alignment.