The Department of Labor’s (DOL) Employee Benefits Security Administration (EBSA) on Feb. 26 issued guidance on the duration of the COVID-19-related relief provided by Disaster Relief Notice 2020-01 and a joint notice, the Notice of Extension of Certain Timeframes for Employee Benefit Plans, Participants, and Beneficiaries Affected by the COVID–19 Outbreak issued by the DOL, the Department of the Treasury and the IRS. The guidance came in EBSA Disaster Relief Notice 2021-01.
ERISA Section 518 and Internal Revenue Code Section 7508A(b) (26 U.S.C. §7508A(b)) generally provide that the Secretaries of Labor and the Treasury may allow an employee benefit plan, sponsor, administrator, participant, beneficiary or other person regarding a plan affected by a presidentially declared disaster to disregard up to one year in determining the date by which any action is required or must be completed. Section 518 further provides that the Secretary of Labor may provide for such extensions of timeframes in the case of a public health emergency declared by the Secretary of Health and Human Services. The relief period under the Notices began on March 1, 2020, the effective date of President Trump’s proclamation declaring that a national emergency existed due to the pandemic.
The 2020 Notices
The joint notice and Notice 2020-01 provide relief for certain actions related to employee benefit plans required or permitted under Title I of ERISA and the Internal Revenue Code. The relief is focused on employee benefit plans, plan participants and beneficiaries, employers and other plan sponsors, plan fiduciaries, and other service providers the pandemic affected.
Why Notice 2021-01 Was Issued
The relief the 2020 notices provided continued until 60 days after the announced end of the COVID-19 National Emergency or such other date announced by the relevant Agency or Agencies in a future notification, but under Section 518 of ERISA and Code Section 7508A(b), the disregarded period for individual actions “required or permitted” is expressly limited by law to a period of one year from the date the individual action would otherwise have been required or permitted. One year from March 1, 2020, is Feb. 28, 2021. The DOL says that “stakeholders have inquired about the continuation of relief beyond that date.”
Individuals and plans with timeframes subject to the relief the 2020 notices provide will have the applicable periods disregarded until the earlier of:
- one year from the date they were first eligible for relief; or
- 60 days after the announced end of the national emergency.
On the applicable date, the timeframes for individuals and plans with periods that were previously disregarded under the 2020 notices will resume. In no case will a disregarded period exceed one year. The first date upon which an individual or plan could be eligible for relief was March 1, 2020, the first day of the national emergency. Therefore, the earliest date upon which a disregarded period can begin to run again is March 1, 2021, including for periods during which an action is required or permitted to be completed that began before March 1, 2020.
Examples
If a qualified beneficiary would have been required to make a COBRA election by March 1, 2020, the joint notice delays that requirement until Feb. 28, 2021, which is the earlier of one 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, the joint notice delays that election requirement until the earlier of one year from that date (i.e., March 1, 2022) or the end of the outbreak period.
If a plan would have been required to furnish a notice or disclosure by March 1, 2020, the relief under the 2020 notices would end regarding that notice or disclosure on Feb. 28, 2021. The responsible plan fiduciary would be required to ensure that the notice or disclosure was furnished on or before March 1, 2021.
In all of these examples, the delay for required or permitted actions that the 2020 notices provide does not exceed one year.
The DOL says that it recognizes that affected plan participants and beneficiaries may continue to experience problems since pandemic continues, even though the relief under the 2020 notices is no longer available due to the statutory one-year limit on the agencies’ authority to grant relief.
The DOL notes in Notice 2021-01 that the “guiding principle for administering employee benefit plans is to act reasonably, prudently and in the interest of the workers and their families who rely on their health, retirement and other employee benefit plans for their physical and economic well-being.” And this, the DOL says, means that plan fiduciaries should make reasonable accommodations to prevent loss of benefits and “undue delay” in providing benefits and should “minimize the possibility of individuals losing benefits because of a failure to comply with pre-established time frames.”
Comply, But We Understand if You Can’t
The DOL acknowledges that there may be instances when full and timely compliance with ERISA’s disclosure and claims processing requirements may not be possible. And it recognizes that such instances include when it is not possible for plans and service providers to comply with pre-established time frames for certain disclosures and decisions about claims when disruptions to a plan or service provider’s principal place of business occur due to a pandemic or natural disaster.
The DOL says that in the case of fiduciaries who have acted in good faith and with reasonable diligence under the circumstances, it will emphasize compliance assistance, as well as grace periods and other relief, in pursuing enforcement.
The DOL says that it coordinated this new guidance with the Treasury Department, IRS, and HHS, and that they concur regarding continuation of relief and the application of the laws under their jurisdiction. The agencies continue to monitor the effects of the COVID-19 outbreak as they relate to employee benefit plans, the DOL says; it adds that they “have been engaged with stakeholders regarding the continued need for relief.”
The agencies contend that preserving and protecting private-sector employee benefit plans may necessitate continued relief, and say they intend to: (1) continue engaging with those affected regarding whether, and how, to better tailor relief, and (2) focus on areas in which participants and beneficiaries continue to need relief as plans continue to move toward normal compliance.
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