On February 26, 2021, the U.S. Department of Labor (DOL) issued Employee Benefits Security Administration Disaster Relief Notice 2021-01 (new guidance) to clarify the limits on the extensions granted on May 4, 2020, for Consolidated Omnibus Budget Reconciliation Act (COBRA) elections and other participant and welfare and pension plan actions.
In its new guidance, the DOL states that the extensions granted last year are subject to a one-year limit imposed under Section 518 of the Employee Retirement Income Security Act of 1974 (ERISA) and Section 7508A(b) of the Internal Revenue Code. The new guidance means that employers need to have a heart-to-heart talk with their COBRA notice vendors to make sure they are accurately computing the deadline for COBRA elections and other plan participant actions and advising participants of these all-important deadlines.
Last year, in joint guidance issued by the DOL and the Internal Revenue Service (IRS), the time periods for plan participants to take certain actions, such as making a COBRA election, were extended during the time period from March 1, 2020, the start of the National Emergency brought on by the COVID-19 pandemic, to the end of the Outbreak Period. The Outbreak Period ends 60 days after the announced end of the COVID-19 National Emergency. The Outbreak Period is ongoing because the National Emergency on which it is based was extended four times.
But the extension of the COBRA election period, and other deadlines imposed on plan participants, is subject to a one-year limit set forth in ERISA and the Internal Revenue Code. Thus, according to the DOL’s new guidance, if a qualified beneficiary would have been required to make a COBRA election by March 1, 2020, that requirement was delayed until February 28, 2021. Similarly, if a qualified beneficiary would have been required to make a COBRA election by March 1, 2021, the required election will not be due until the earlier of March 1, 2022, or the end of the Outbreak Period, which if not further extended will expire June 21, 2021. Thus, the extended deadline for a participant to elect COBRA will have to be determined on a case-by-case basis and depends on when the participant sustained a qualifying event and a COBRA election notice was provided.
The new guidance also asks plan administrators to make “reasonable accommodations” and to take steps to prevent the loss or undue delay of benefits because of the pandemic or the failure to meet pre-established time frames. In certain cases, according to the new guidance, the plan administrator should affirmatively send a notice to the participant advising of the end of the extension period. If plan disclosures issued prior to or during the pandemic failed to provide accurate information regarding the time in which participants were required to take action, they may need to be reissued or amended.
In the case of ERISA group health plans, they should consider ways to ensure that participants who are losing group health coverage are made aware of other coverage options, including coverage through the health insurance marketplace in their state. By the same token, where full and timely compliance with pre-established time frames for certain claims’ decisions or disclosures is not possible, the DOL says its enforcement approach will emphasize compliance assistance and include grace periods and other relief.
The DOL’s new guidance means that employers need to obtain assurances from their COBRA administrators that the expiration of COVID-19 extensions will be determined accurately on a case-by-case basis. Employers also need confirmation that COBRA notices or other communications will be sent to warn participants of their extended deadlines. They need to be proactive to ensure they can’t be accused later of failing to discharge their fiduciary duties to plan participants and beneficiaries.
For more information, contact Theodore P. Stein.
Theodore P. Stein
410-576-4229 • firstname.lastname@example.org
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