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Additional COVID-19 Extensions = Greater Administrative Headaches for Plan Sponsors

As any employer is keenly aware, the administration of an employee benefit plan (especially a group health plan) involves a number of different deadlines imposed under the Employee Retirement Income Security Act (ERISA) and the Internal Revenue Code (Code).  Amidst concerns that the current COVID-19 pandemic may cause individuals to lose benefits due to the failure to meet certain pre-established deadlines and in recognition of the challenges group health plans may face in complying with certain notice obligations, the Department of Labor and Internal Revenue Service (collectively, the “Agencies”) jointly published notice in the Federal Register of a significant extension in application of the following statutorily prescribed deadlines:

Special Enrollment Periods

  • 30-day deadline to request enrollment in the event of a loss of eligibility for other health coverage or the acquisition of a new dependent due to marriage, birth, adoption or placement for adoption
  • 60-day deadline to request enrollment in the event of either a loss of eligibility for coverage under Medicaid or a state children’s health insurance coverage (CHIP) or gaining eligibility for premium assistance through Medicaid or CHIP.

COBRA Continuation Coverage

  • 30-day period for employer to notify plan administrator of certain COBRA qualifying events
  • 14-day period for plan administrator to issue COBRA Election Notice to qualified beneficiary
  • 60-day period for qualified beneficiary to elect COBRA continuation coverage
  • 45-day period for qualified beneficiary to submit initial COBRA premium payment
  • 30-day period for qualified beneficiary to submit subsequent COBRA premium payments
  • Qualified beneficiary’s

COVID-19: Mid-Year Changes to 401(k) Plans

U.S. employers looking to reduce operating costs in the short term in response to the disruption caused by the COVID-19 pandemic may seek to reduce or suspend their matching or nonelective contributions in their 401(k) plan. The following summarizes the key issues facing employers in making the determination to suspend or reduce safe-harbor contributions.

Suspending or Reducing Employer Contributions in Non-Safe-harbor Plans

Discretionary employer matching and nonelective contributions generally may be immediately suspended or reduced through appropriate corporation action.  Employers should consider the following in connection with a suspension or reduction of employer contributions:

  • Does the Plan have Discretionary Employer Contributions?

If the plan does not include provisions setting out a formula or specific amount of employer contributions, the board simply needs to take action to change the amount of the employer matching contribution, which could include suspending the contribution until the board takes further action.

  • Does The Plan have a Set Formula for Determining Matching or Nonelective Contributions?

If the retirement plan or related documents set out a formula for determining the employer contributions (that is, the amount of the contributions are “hard-wired” into the plan), the plan will need to be amended to change the formula.  Companies may also consider removing specific formulas entirely and replacing them with provisions stating that the amount of the employer nonelective or matching contributions is discretionary and will be determining by the board from time to time.

  • When may the Reduction or

CARES Act Expands U.S. Retirement Plan Access and Provides Additional Relief and Changes to Employer-Provided Benefits

The Coronavirus, Aid, Relief and Economic Security Act (“CARES Act”) provides legislative relief to participants impacted by the Coronavirus pandemic.  A summary of key provisions of the CARES Act, based on the current draft, is included below. These provisions are, of course, still subject to approval by both houses of Congress and the President’s signature.

Provisions Applicable to Retirement Plans

Coronavirus-Related Distributions

Tax-favored coronavirus-related distributions (“CRD’s) which do not exceed $100,000 will not be subject to the 10% early distribution tax.  A CRD means any distribution from a plan made on or after January 1, 2020 and before December 31, 2020 to an individual who is one of the following:

  • An individual who is diagnosed with COVID-19 or SARS-CoV-2;
  • An individual whose spouse or dependent is diagnosed with COVID-19 or SARS-CoV-2; or
  • An individual who experiences adverse financial consequences as a result of being quarantined, furloughed, laid off, experiencing a reduction of work hours, inability to work due to lack of child care caused by COVID-19 or SARS-CoV-2, the closing or reduction of hours by a business owned or operated by such participant due to COVID-19 or SARS-CoV-2, or other factors determined by the Treasury Secretary.

Notably, the plan administrator may rely on the individual’s certification that he/she has experienced a CRD.  Tax on the CRD shall, unless the individual elects to the contrary, be spread pro-rata over a three year period.  The individual may repay the CRD to the plan without regard to contribution

COVID-19 U.S.: Collected Employee Benefits Blog Posts

We have published a number of COVID-19/coronavirus related blog posts for our U.S. clients and friends over the past couple of weeks.  In an effort to consolidate the flurry of guidance and keep you up-to-date in these fast-changing circumstances, we are posting the links to all of our COVID-19 related blog posts here.  We will update the list below as additional blog posts are added.

  • IRS relief for high deductible health plans covering testing and treatment: click here
  • ERISA fiduciary responsibilities in an uncertain market: click here
  • HIPAA compliance during the COVID-19 pandemic: click here
  • Aggregated links to federal government guidance: click here
  • Compensation considerations fr public and private U.S. companies: click here
  • Emergency paid sick leave and family leave under the Families First Coronavirus Response Act (FFCRA): click here and here
  • Proposed legislative relief for participant access to retirement plan funds under the Coronavirus, Aid, Relief and Economic Security Act (CARES Act): click here
  • FFCRA paid sick and family leave tax credits for small employers: click here
  • FFCRA COVID-19 diagnostic testing mandate for most group health plans: click here
  • Providing employee assistance through interest-free loans: click here
  • Summary of the CARES Act retirement plan access and employer-sponsored health plan provisions: click here
  • Key Issues for employers

Families First Coronavirus Response Act Part 2 of 2: Impact on Employer Health Plans

The Families First Coronavirus Response Act (“FFCRA”) enacted March 18 provides a combination of benefits to help U.S. employees during the COVID-19 pandemic:

  • Mandated benefits under employer health plans,
  • Paid sick leave benefits (up to 80 hours) – click here for our discussion of the paid sick leave benefits,
  • FMLA benefits (up to 12 weeks with a combination of paid and unpaid leave) – click here for our discussion of the FMLA benefits,
  • Tax benefits to ease the cost to certain small employers of providing health care coverage under the newly expanded sick leave and FMLA benefits noted above click here for a discussion of the FMLA benefits – click here for our discussion of the small employer tax credits.

The following is a summary of the mandated benefits COVID-19 testing requirements applicable to employer health plans.

COVID-19 Diagnostic Testing Coverage Requirements

Most group health plans[1] and group insurance coverage are required to cover COVID-19 testing related items and services without imposing any cost sharing (including deductibles, copayments, and coinsurance) or prior authorization or medical management requirements. The following is a summary of the key points of the FFCRA requirement:

  1. Coverage of Diagnostic Items and Services without Cost-Sharing. The specific items and services to which the coverage mandate applies include:
    1. “In vitro diagnostic products”[2] used for the detection of SARS–CoV–2 or diagnosis of the virus that causes COVID–19

Families First Coronavirus Response Act Part 1 of 2: Small Employer Tax Credits

The Families First Coronavirus Response Act (“FFCRA“) generally requires U.S. employers with fewer than 500 employees (“Small Employers”) to provide paid sick leave and additional FMLA benefits to their employees.[1] You can read our summary of the Emergency Paid Sick Leave Act and the Emergency Family and Medical Leave Expansion Act here and here, respectively.

In order to offset some of the costs these provisions impose on Small Employers, the FFCRA also provides a quarterly payroll tax credit equal to 100% of the qualified sick and leave wages paid to employees under the Emergency Paid Sick Leave Act and the Emergency Family and Medical Leave Expansion Act.

The amount of leave wages taken into account is limited with respect to each individual employee for purposes of the credit.

  • For sick leave wages paid due to an employee’s illness or quarantine, the amount of wages taken into account for purposes of the credit is capped at $511 per day and $5,110 in the aggregate for each employee; and
  • For sick leave wages paid due to an employee’s need to care for others or care for the employee’s child(ren) due to school closures[2], the amount of wages taken into account for purposes of the credit is capped is $200 per day and $2,000 in the aggregate for each employee. Sick leave wages under the FFCRA are available for a maximum of 2 weeks (10 days).

Guidance on Employee Benefits and the Coronavirus (COVID-19)

As the Coronavirus has continued to spread, there has been guidance from various entities on a myriad of topics pertaining to employee benefits. Summaries and links to such guidance can be found below. This information will be updated regularly as more guidance becomes available.

The Health Insurance Portability and Accountability Act (HIPAA): The Office for Civil Rights, a division of the U.S. Department of Health and Human Services, published a bulletin outlining privacy of protected health information and when covered entities may disclose such information without a patient’s authorization. Covered entities may be able to disclose needed protected health information without individual authorization to public health authorities, to persons at risk of contracting or spreading a disease, or to prevent a serious and imminent threat, among other limited circumstances. Covered entities must make reasonable efforts to limit the information disclosed to that which is the minimum necessary to accomplish the purpose. In a prior post, we provided a review of the bulletin and ongoing HIPAA obligations for covered entities.

The Family and Medical Leave Act (FMLA): The U.S. Department of Labor released a Q&A addressing various questions about employee rights and employer responsibilities under the FMLA. Eligible employees are typically entitled to take up to 12 weeks of unpaid, job-protected leave in a designated 12-month period due to their own illness or that of a family member. Covered employers must continue to abide by federal FMLA laws as well

HIPAA Continues to Apply During Coronavirus Pandemic

As the Coronavirus Disease 2019 (COVID-19) pandemic grows, employers and others may be wondering how the public health emergency created by the outbreak affects information protected under the Health Insurance Portability and Accountability Act of 1996 (HIPAA).

The short answer: All HIPAA protections continue to apply. Accordingly, employer-sponsored health plans, which are “covered entities” subject to HIPAA, must continue to adhere to HIPAA’s privacy and security rules and may not use or disclosure protected health information (PHI) in a manner not already provided for under HIPAA in the absence of an applicable exception issued by the U.S. Department of Health and Human Services. As a reminder, PHI that an employee obtains when carrying out an administrative function for the plan generally cannot be shared with the employer.  For example, if in the process of performing auditing activities for the employer-sponsored health plan, an employee learns that the plan has provided coverage for the COVID-19 treatment for an employee’s child, that information is PHI and the employee is prohibited from sharing that information with the employer.

The U.S. Department of Health and Human Services Office for Civil Rights recently issued a Bulletin to remind covered entities of their continuing compliance requirements and the circumstances under which PHI may be disclosed without an individual’s authorization, including:

  • Treatment, when necessary to treat the patient or a different patient by one or more health care providers.
  • Public health activities, including disclosure to a public health authority such as the

Fiduciary Responsibilities under ERISA in an Uncertain Market

If you are an ERISA fiduciary charged with management or investment of plan assets, and recent market activity has not tripped any alarm bells — or, if the alarm bells have been tripped, but you are are looking for a bit of guidance on how to respond, then keep reading.  Due to a combination of recent factors, including the spread of the Coronavirus (COVID-19), the stock market suffered its worst drop in over 30 years this past week. Moreover, the market outlook will likely continue to be uncertain for the near future as businesses around the world adjust and take action in response to the COVID-19 outbreak and many consumers are quarantined in their homes.

In this volatile market, it is important for fiduciaries of retirement and other funded plans governed by the Employee Retirement Income Security (ERISA) to keep their fiduciary duties in mind and take appropriate action. As a reminder, those duties under Sections 404 and 406 of ERISA include:

  • The duty to act prudently;
  • The duty to diversify assets of the plan;
  • The duty to comply with provisions of the plan;
  • The duty of loyalty;
  • The duty to pay only reasonable plan expenses; and
  • The duty to avoid prohibited transactions.

The first three of these are particularly relevant when the market is uncertain.

  • The duty to act prudently: It is important to remember that this duty requires the fiduciary to act with the care, skill, prudence, and diligence that a prudent person acting in

IRS Relief for HDHPs Covering COVID-19 Testing and Treatment Costs

Yesterday, the Internal Revenue Service (IRS) issued Notice 2020-15 announcing that a high deductible health plan’s payment of COVID-19 (coronavirus) testing and treatment prior to satisfaction of the plan’s minimum deductible will not affect its status as a high deductible health plan.

Pursuant to Section 223(c)(2) of the Internal Revenue Code, high deductible health plans generally must require covered individuals to satisfy minimum deductibles before the plan can pay for any medical care services and items (subject to certain limited exceptions such as preventive care) in order for the covered individuals to remain “eligible individuals” for health savings account (HSA) purposes.   Under the relief provided in Notice 2020-15, this minimum deductible requirement will not apply to:

  • Medical care services and items related to testing for and treatment of COVID-19. These services and items may, therefore, be provided without a deductible or with a deductible that is less than the otherwise applicable minimum deductible.  For 2020, the minimum deductibles are $1,400 for self-only coverage and $2,800 for family coverage.
  • Any COVID-19 vaccine developed in the coming months. The IRS included a reminder that vaccines will continue to be treated as preventive care to which the minimum deductible requirement does not apply.

This is welcome news for employers sponsoring high deductible health plans who have been exploring ways in which to help alleviate the financial obstacles that may prevent employees from getting tested or seeking treatment for COVID-19 as well as for individuals with fully-insured

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