On February 24, 2021, the White House issued a press release in which President Biden announced that the COVID-19 national emergency must continue beyond March 1, 2021. On February 26, 2021, the Department of Labor (DOL), in conjunction with the other regulatory Agencies, released Disaster Relief Notice 2021-01 (Notice 2021-01), giving guidance on the extension of the Outbreak Period. The guidance explains the operation of the continued relief afforded employee benefit plans, plan participants, and beneficiaries due to the COVID-19 national outbreak.
The Outbreak Period was set to expire on March 1, 2021.
As explained in a previous post, the Employee Benefits Security Administration of the Department of Labor (EBSA), in coordination with the Department of the Treasury (Treasury), the Internal Revenue Service (IRS), and the Department of Health and Human Services (HHS), released Notice 2020-01 in April 2020. It established a tolling period, known as the Outbreak Period, which paused certain administrative deadlines pertaining to benefit plans subject to the Employee Retirement Income Security Act (ERISA), plan sponsors, participants, and beneficiaries. Under Notice 2020-01, the Outbreak Period would expire sixty days after the announced end of the COVID-19 national emergency by the President. However, the administrative deadlines’ underlying regulations only permit up to a one-year tolling of the statutory periods. EBSA issued Notice 2021-01 as joint notice between DOL, Treasury, and IRS (collectively the “Agencies”) to clarify the operation of the extended Outbreak Period in light of the one-year regulatory maximum tolling period.
The Outbreak Period administrative deadline relief timeframes apply on a “person-by-person” basis.
The maximum period for disregarding the deadlines for a plan or individual cannot exceed one year. Accordingly, Notice 2021-01 announced that for an individual plan, sponsor, administrator, participant, or beneficiary, the Outbreak Period administrative deadline relief timeframes will continue until the earliest of (a) one year from the date they were first eligible, or (b) sixty days after the end of the national emergency. In summary, rather than the deadline extensions ending on February 28, 2021, or being extended for another year beginning March 1, 2021, the Outbreak Period deadline extensions will apply on an individual basis.
Below are the DOL’s illustrations of how the deadline relief timeframes will operate in certain scenarios for a qualified COBRA beneficiary.
- If a qualified beneficiary would have been required to make a Consolidated Omnibus Budget Reconciliation Act (COBRA) election by March 1, 2020, Notice 2021-01 delays that requirement 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).
- If a qualified beneficiary would have been required to make a COBRA election by March 1, 2021, Notice 2021-01 delays that election requirement until the earlier of 1 year from that date (i.e., March 1, 2022) or the end of the Outbreak Period.
- If a plan (or employer/plan sponsor) would have been required to furnish a notice or disclosure by March 1, 2020, the relief under the Notices would end with respect to that notice or disclosure on February 28, 2021. The responsible plan fiduciary would be required to ensure that the notice or disclosure was furnished on or before March 1, 2021.
Notice 2021-01 deadline relief timeframe as it applies to COBRA election and payments.
The Agencies’ guidance clarifies that the deadline relief applies on an individual basis for the 60-day COBRA election period. Meaning the deadline relief gives an individual the earliest of one year from the date they were required to make their election, or until sixty days after the end of the national emergency to elect COBRA. That deadline relief works similarly for the COBRA premium payment grace period. Assume a COBRA qualified beneficiary (QB) enrolls in COBRA coverage and makes payments for several months. However, the QB fails to make the COBRA payment for January 2021 coverage by the normal grace period of January 31, 2021. The Joint Notice allows the QB to make that payment within one year of the normal January 31, 2021 grace period deadline, or by the end of the Outbreak Period, whichever is sooner.
The guidance presents several administrative issues.
The Agency Notice strongly suggests that plan sponsors have a fiduciary duty to communicate to individuals that their one-year tolling period is coming to an end.
Plans wishing to follow this suggestion will need to send such notices on an individual rolling basis presenting administrative challenges. The guidance also states that plans that issued prior disclosures about the Outbreak Period extension may need to reissue or amend those previous disclosures to provide accurate information. Notice 2021-01 states that plans should also consider notifying plan enrollees of the Marketplace Special Enrollment Period, which ends on May 15, 2021.
The guidance states that the DOL acknowledges that compliance with the new rules may be difficult for some plans.
Accordingly, the DOL assists plans with becoming compliant with the new rules, so long as the plan acts in good faith to follow the guidance. Before making changes or updates, plans should review Notice 2021-01 and contact their legal counsel for advice.
See our recent compliance alert, New DOL Outbreak Period and Extended Time Frames Guidance
Register now for our Thursday, March 11 compliance webinar where we’ll cover DOL outbreak guidance and its implications: Regulatory and Legislative Update
EPIC offers this material for general information only. EPIC does not intend this material to be, nor may any person receiving this information construe or rely on this material as, tax or legal advice. The matters addressed in this document and any related discussions or correspondence should be reviewed and discussed with legal counsel prior to acting or relying on these materials.
Sign up for our Compliance Matters Newsletter
You’ll receive our monthly newsletter, as well as special compliance alerts and invitations to our compliance webinars