COVID-19 has forced our nation to rapidly establish new laws and regulations to combat the devastating economic aftermath caused by the virus. One of the consequences is the impact of employment and child care changes on many employees’ annual medical/dependent care elections and health insurance options. The Department of Labor (DOL) has responded by extending HIPAA and COBRA timeframes. Additionally, the IRS has given more flexibility related to Section 125 Cafeteria Plan mid-year elections.
COBRA and HIPAA Timeline Extensions
The timeframe for the extension of COBRA and HIPAA is retroactive to March 1, 2020. It will last until 60 days after the announced end of the National Emergency period or a later date that will be announced in future guidance. This timeframe is named as the “outbreak period.”
The DOL has extended the deadlines for participants and beneficiaries to elect continued health benefits through COBRA. Currently, the employers must provide a COBRA Election Notice to individuals who experience a qualifying event that causes the individual and their qualifying dependents to lose their group health benefits. This notice is required to be given within 44 days of the loss of coverage. Under the DOL extension, the notice requirement will be extended to the end of the outbreak period. At this point, there are not any revisions to the notice.
Currently, employees and dependents have 60 days from the qualifying event to elect continued health benefits under COBRA. The new rule will extend that election period through the end of the outbreak period. The timeframe for paying COBRA premiums has also been extended. Normally the first monthly premium is due 45 days from the date the employee or qualified beneficiary makes the election of coverage with a 30 day grace period for subsequent monthly premium payments. These deadlines are also waived during the outbreak period and may create additional administrative COBRA tracking burden for health plan administrators.
The Health Insurance Portability and Accountability Act (HIPAA) allows employees/qualifying dependents that have lost group coverage a 30 day special enrollment period to enroll in an individual health plan. The 30 day rule also applies to adding a new spouse or dependent by marriage, the birth of a child or adoption of a child. Also, employees have a 60 day special enrollment after the loss (or gain of eligibility) for Medicaid or Children’s Health Insurance Program (CHIP) program. These timelines have been disregarded for the outbreak period as well.
Section 125 Cafeteria Plan Mid-Year Elections
In response to the COVID-19 pandemic, the IRS determined they will permit employers the option to allow mid-year election changes for flexible medical spending accounts (FSA) and dependent care reimbursement accounts (DCAP). This change will allow those parents who planned for childcare deductions to make adjustments for school and summer program cancellations. It will also allow other employees to adjust their health care flex spending account (FSA) for surgery cancellations and other medical necessities that have arisen due to COVID-19. If employers decide this will be an option they want to offer, they will need to do a 125 plan amendment. These amendments can be made until the end of the plan year 2021, and they will be considered retroactive back to January 1, 2020. These mid-year elections would only be effective for the 2020 plan year. FSA accounts also have an option to elect either a grace period or a rollover amount of up to $550, which is increased from $500. Employers may want to do a quick survey to ask about employees about their current situation as it relates to their HCFSA or DCAP, allowing plan sponsors to make an informed decision about whether to allow mid-year election changes.
2020 has been an unprecedented year for employers and employees. Many lives have been interrupted and altered due to COVID-19. The IRS and the DOL made these changes to ease the burden of health care and dependent care choices that must be made in light of the pandemic. Employers Council will continue to provide information as we learn about additional guidance and interpretation of these benefits; please call us with any questions.