On Tuesday, April 28, 2020, the U.S. Department of Labor (DOL) and the Internal Revenue Service published new guidance providing various types of relief in connection with employee benefit plans. In this client alert, we summarize the key provisions of the new guidance.
For purposes of the discussion below, the "Emergency Relief Period" began on March 1, 2020 (the effective date of President Trump's national emergency declaration relating to COVID-19) and will end 60 days after the national emergency declaration is lifted, but no later than February 28, 2021.
All ERISA Plans
The following paragraphs apply to all plans that are subject to ERISA.
Notices and Disclosures—Relaxation of Delivery Standards. For notices and disclosures required to be furnished to participants and beneficiaries during the Emergency Relief Period, plan administrators must make a good faith effort to provide the documents as soon as possible, but will not be in violation of ERISA if delivery is not made in accordance with generally applicable delivery standards or is not made on a timely basis. Plan administrators are specifically permitted to use electronic delivery (e.g., email, text message, website) if they reasonably believe that the participant or beneficiary has access to these means of communication. This represents a significant expansion of the existing standards for electronic delivery. Examples of documents covered by this relief include summary plan descriptions, summaries of material modification, and summary annual reports; for retirement plans, additional examples include benefit statements, annual funding notices, participant fee notices and blackout period notices.
Claims and Appeals—Tolling for Participants and Beneficiaries.1 Deadlines by which individuals must file benefit claims, and appeals of denied claims, are tolled during the Emergency Relief Period. This particular relief does not affect a plan administrator's obligation to respond to claims and appeals within the prescribed time frames, but those obligations may be subject to the gentle enforcement described in "Fiduciary Compliance Generally," below.
Fiduciary Compliance Generally—Gentle Enforcement. Participants and beneficiaries may encounter problems fully and timely meeting their ERISA obligations during the Emergency Relief Period. The DOL expects fiduciaries to make reasonable accommodations to prevent the loss of benefits or undue delay in benefits payments. Plans and service providers may encounter similar problems, particularly with respect to claims and appeal processing. In its guidance, the DOL states that its approach to enforcement will emphasize compliance assistance and include grace periods and other relief where appropriate.
Group Health Plans
The following paragraphs apply to group health plans that are subject to ERISA or to the Internal Revenue Code. In addition, HHS has indicated that similar measures will apply to non-federal governmental group health plans and to issuers offering group health plans subject to the PHSA.
COBRA Time Frames. COBRA generally applies to group health plans of employers with 20 or more employees. The Emergency Relief Period is disregarded when calculating the following dates:
- The date by which a plan sponsor is required to provide a COBRA election notice;
- The date by which an individual must elect COBRA continuation coverage;
- The date by which a COBRA premium payment must be made; and
- The date by which an individual must notify the plan of a COBRA qualifying event that is a divorce, a legal separation, a dependent child ceasing to qualify as such, or a disability.
Special Enrollment Time Frames. The "special enrollment" rules allow individuals to enroll in an employer's major medical plan in the middle of the plan year in certain circumstances. Plans must allow the individual no less than 30 days (60 days in some situations) in which to request special enrollment. During the Emergency Relief Period, deadlines for the individual to request special enrollment are tolled.
External Review Timeframes. External review is generally required for non-grandfathered employer group health plans that are subject to the Affordable Care Act (typically, major medical plans for active employees). The Emergency Relief Period is disregarded when calculating the following dates:
- The date by which a claimant, after receiving an adverse claim or appeal decision, must file a request for external review; and
- The date by which a claimant, having been told that the request for external review was incomplete, must file supplemental information to perfect the request.
The following paragraphs apply to retirement plans that are subject to ERISA.
Plan Loans and Distributions—Non-Enforcement of Plan Procedural Standards. Plan loans and distributions are subject to a number of requirements under the Internal Revenue Code (such as spousal consent for certain types of plans), and to procedural requirements imposed by the plan itself. If a plan administrator fails to follow the plan's procedural requirements during the Emergency Relief Period, the DOL will not take enforcement action, provided that (i) the failure is due solely to the COVID-19 outbreak, (ii) the plan administrator makes a good faith effort to comply, and (iii) the plan administrator makes a reasonable attempt to correct any procedural deficiencies (such as assembling any missing documentation) as soon as administratively possible.
Salary Reduction Contributions and Loan Repayments. Plan administrators must remit salary reduction contributions and loan repayments to the plan as soon as administratively practicable following each pay date, but in no event later than the 15th business day of the month following the month of withholding. If a plan administrator temporarily delays these remittances during the Emergency Relief Period, the DOL will not take enforcement action, provided that the failure was due solely to the COVID-19 outbreak. However, plan administrators and service providers must act reasonably and prudently to complete the remittance as soon as administratively practicable.
If you have any questions regarding this client alert, or if you would like assistance with any of the requirements described here, please contact the authors or any member of Venable's Employee Benefits and Executive Compensation Practice Group.
1 This paragraph applies not only to ERISA plans, but also to group health plans subject to the Internal Revenue Code. The U.S. Department of Health and Human Services ("HHS") has indicated that measures similar to those described in the "Claims and Appeals" paragraph will apply to non-Federal governmental group health plans and to issuers offering group health plans subject to the Public Health Service Act ("PHSA").