Dear Valued Members:
In response to the COVID-19 outbreak and resulting National Emergency declaration, the Departments of Labor (DOL), Health and Human Services, and Internal Revenue Service (the “Departments”) issued rules and guidance that mandate extensions of certain timeframes for participants covered under group health plans and allow plans to ease restrictions on some FSA plan regulations, as explained in the following paragraphs.
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Extension of Group Health Benefit Plan Timeframes
The Departments recognize that plan participants may encounter problems, such as exercising rights to COBRA continuation coverage or difficulty filing or perfecting claims, and extend timeframes for certain activities. This is accomplished by excluding the “Outbreak Period” when calculating plan deadlines for the specified activities. The Outbreak Period is identified as the period beginning with the declaration of National Emergency (March 1, 2020) and ending 60 days after the National Emergency ends.
The new rules extend timelines under eight scenarios for employees, as explained below. The examples that follow each scenario assume that the National Emergency ended on April 30 and the Outbreak Period will end on July 29, 2020. The DOL and IRS have stated that the Outbreak Period may be revised based on the impact of the virus in different parts of the country.
- HIPAA Special Enrollment Period. Under HIPAA, employees have 30 days to request enrollment in a plan following (i) the loss of other group coverage, or (i) acquisition of a new dependent. The enrollment period is extended to 60 days for employees who lose or gain eligibility under Medicaid or CHIP. The new rules extend the enrollment period by disregarding the Outbreak Period.Example: Mary previously declined to participate in her employer-sponsored health plan. On April 1, 2020, Mary gave birth and would like to enroll herself and her child into her employer’s plan. Under the new rules, Mary may enroll as early as the child’s date of birth, but the enrollment period will extend through July 29, 2020, the 30th day after the end of the Outbreak Period.
- COBRA Election Period. The 60-day election period for COBRA Continuation Coverage is disregarded during the Outbreak Period.Example: Paul is laid off from his job and loses his employer-sponsored health coverage. He receives his COBRA election notice on April 1, 2020. Under the extension rules, the Outbreak Period is disregarded in the calculation of Paul’s election period, and the last day of the election period will be 60 days after June 29, 2020.
- COBRA Payment Period. Under COBRA, a qualified beneficiary has 45 days from the date of his COBRA election to make his first premium payment. After the initial payment, premiums must be paid by the end of the 30-day grace period that begins on the first day of each month. The rules extend the payment deadlines by disregarding the Outbreak Period.Example: Juan elected COBRA continuation coverage on February 1; his initial payment was due March 17, and his first monthly payment due on April 1. Juan missed both payments. Under the rules, the Outbreak Period is disregarded in the calculation of payment due dates, and the initial payment, as well as payments for April, May, and June are considered timely if received by July 29, 2020, 30 days after the end of the Outbreak Period.
- COBRA Notice of Qualifying Event. COBRA requires that a participant notify the plan within 60 days of a qualifying event (such as a divorce) that would cause a dependent to lose eligibility, or a disability that would extend the maximum COBRA extension period. The rules extend the 60-day notification period by disregarding the Outbreak Period.Example: Ella and her husband are covered under her employer’s group health plan. Their divorce was finalized on March 1 and, as a result, her husband lost eligibility for coverage under her health plan. Ella and/or her former husband have until 60 days after the end of the Outbreak Period (August 28) to notify the plan of the divorce, allowing the former husband to continue coverage under COBRA.
- Deadline for filing medical claims. The rules extend the period in which a medical claim must be filed by disregarding the Outbreak Period.Example: Eric receives medical treatment on April 1, 2020. His medical plan requires that claims be received within 90 days of the date the expense is incurred. Under the rules, the deadline for filing Eric’s claim is extended to 90 days after the end of the Outbreak Period, or September 27, 2020.
- Deadline for appealing an adverse benefit determination. ERISA imposes strict deadlines in which a participant may appeal an adverse benefit determination. The new extension rules extend the period in which an appeal may be filed by disregarding the Outbreak Period.Example: Arlene receives a denial of a medical claim on February 1, 2020 and has 180 days to appeal the determination. Twenty-eight days passed between the date of the denial and the start of the Outbreak Period, so Arlene must file her appeal within 152 days (180-28 days following February 1 to March 1) after the end of the Outbreak Period.
- Deadline for requesting external review. Under ERISA, a participant has four months after receipt of an adverse benefit determination or notice of rescission of coverage to request an independent medical review. The rules extend this period by disregarding the Outbreak Period.Example: Richard receives the denial of a medical claim on medical necessity grounds on April 1, 2020, and has four months to request an external review. Under the new rules, Richard must request the external review within four months of the end of the Outbreak Period.
- Deadline to perfect request for external review. A plan participant who submits an incomplete request for external review may perfect the request within the initial four-month filing period. The rules disregard the Outbreak Period in the calculation of this date.Example: Richard receives the denial of a medical claim on April 1 and requests an external review on April 15. On April 20, he receives notification that his external review request is incomplete. Richard may perfect his request within the initial four-month filing period. Under the rules, the filing period ends 180 days after the end of the Outbreak Period.
The rules also offer relief to group health plans by disregarding the Outbreak Period when determining the deadline for providing a COBRA election notice. Under COBRA, an employer must notify the plan administrator of a qualified beneficiary’s COBRA eligibility within 30 days of loss of coverage, and the plan administrator must then deliver the election notice within 14 days.
Example: Howard’s employer notifies the plan administrator on March 15 that Howard is a qualified beneficiary under COBRA. Under the extension rules, the plan administrator has until July 13 – 14 days after the end of the Outbreak Period – to provide the COBRA election notice to Howard.
Relaxation of Certain FSA and Cafeteria Plan Rules
The IRS recognizes that the COVID-19 crisis will likely interrupt scheduled medical procedures and appointments and, as a result, employees are more likely to have unused balances in their FSA accounts at the end of the 2020 plan year or grace period. As a result, new IRS guidelines offer employers the discretion to amend their FSA plans to temporarily extend the applicable grace period for using FSA funds. Additionally, the agency has provided employees and employers increased flexibility with respect to mid-year elections under cafeteria plans. Employers who sponsor a Section 125 plan have the option to amend their plans to take advantage of these new rules but are not required to do so. Finally, the list of FSA-eligible expenses has been expanded to include certain over-the-counter medications and products.
- Expansion of FSA Grace Period. Employers may amend their cafeteria plans to permit employees to apply unused funds remaining in a health or dependent care FSA as of the end of a grace period ending in 2020 or plan year ending in 2020 to pay or reimburse expenses incurred through December 31, 2020. The extension of time for incurring claims is available to both cafeteria plans that have a grace period, and those that allow a carryover (prior to the new ruling, health FSAs could either adopt a grace period or provide for a carryover amount but cannot have both).
Example A: ABC Company’s 2019 plan year runs from July 1, 2019 to June 30, 2020. The company provides a health FSA with a 90-day grace period; as a result, employees may use 2019 contributions to pay for services incurred through September 30. Bob, an employee of ABC, was scheduled to have elective surgery in May, 2020; however, his surgery was postponed until October 15 and he had $1,500 remaining in his health FSA at the end of the grace period. If the company elects to amend the plan and extend the grace period, Bob may use his 2019 FSA balance to pay for his surgery, as well as any other eligible expenses incurred prior to December 31.
Example B: Acme Company provides a health FSA with a $500 carryover policy but no grace period. Its plan year runs from July 1, 2019 to June 30, 2020. Jill has a remaining balance in her health FSA for the 2019 plan year of $2,000. In October she undergoes surgery that had been postponed due to the COVID-19 crisis; her total costs are $1,900. Even though the company did not previously offer a grace period, the new rules permit Jill to be reimbursed from the health FSA for $1,900 from the $2,000 remaining in her FSA at the end of the 2019 plan year, leaving $100 unused from the 2019 plan year. Under her plan’s carryover rules, Jill is allowed to use the remaining $100 until June 30, 2021.
- Expansion of FSA Eligible Expenses. Effective January 1, 2020, over-the-counter medicines and products have been returned to the list of expenses that are eligible for reimbursement under participants’ flexible spending accounts. Eligible over-the-counter expenses include:
- Pain relief medications such as acetaminophen and nonsteroidal anti-inflammatory drugs (NSAIDs);
- Cold and flu products;
- Allergy products such as antihistamines and decongestants;
- Heartburn medications; and
- Menstrual products.