Changes to COBRA timeline, Cafeteria Plan election rules, and increased FSA carryover
Employee Benefit Plans
On April 28, 2020, the IRS and EBSA issued a joint rule extending certain timeframes related to employee benefit plans. This rule is applicable to group health plans, disability and other welfare plans, and pension plans subject to ERISA and the Internal Revenue Code. In addition, HHS has adopted a similar policy to extend timeframes that would apply to non-Federal governmental group health plans subject to the Public Health Service Act.
The rule requires Plans to disregard the period from March 1, 2020 until 60 days after the end of the current National Emergency (Outbreak Period) when calculating the timeframes listed below:
The 60-day election period for COBRA continuation coverage under ERISA and the Code.
The date for mailing COBRA premium payments
The date for individuals to notify the plan of a qualifying event or determination of disability under ERISA section 6060(a)(3).
The date within which individuals may file a benefit claim under the plan’s timely filing period.
The date within which claimants may file an appeal of an adverse benefit determination
The date within which claimants may file a request for an external review after receipt of an adverse benefit determination or final internal adverse benefit determination.
The date within which a claimant may file additional information for an external review upon finding that the request was not complete.
With respect to the group health plan (sponsors and administrators), the Outbreak Period shall be disregarded when determining the date for providing a COBRA election notice.
This means that during the Outbreak Period, the clock is not running on any of these timeframes. For an event that occurred prior to March 1, 2020, if the applicable timeframe was not satisfied prior to March 1, the timeframe is effectively stopped as of that date, and will not be picked up again until after the end of the Outbreak Period.
What needs to be done to comply with the change in timeframes?
We will include an insert in any COBRA Qualifying Event or other QB notices that includes information on the COBRA related extensions. A copy of that notice can be found here.
IRS Issues Notices to Relax Cafeteria Plan Election Rules for COVID-19 & Increase Health FSA Carryover
On May 12, the IRS released two notices providing relief on cafeteria plan election rules and increasing the allowed health FSA carryover. These notices are options for an employer to consider and not a requirement.
IRS Notice 2020-29 & 2020-33
This notice allows cafeteria plans to permit mid-year changes to election under a section 125 cafeteria plan related to employer sponsored health coverage, health care FSAs and dependent care FSAs. It also allows cafeteria plans to provide an extended grace period to pay or reimburse medical or dependent care expenses. And it provides clarification regarding recent COVID-19 related relief for HDHPs.
Election Changes – Employers can amend cafeteria plans to allow the following prospective changes during the calendar year 2020:
- New elections for employer-sponsored health coverage by employees who initially declined coverage
- Elections into different health coverage sponsored by the same employer (including employee coverage to family coverage)
- Revocation of existing election for employer-sponsored health coverage. This option does require a self-attestation from the employee that he/she will immediately be enrolled in other comprehensive coverage.
- Changes to health care or dependent care FSAs, including revocation, increase, decrease or new elections
Employers that choose to amend the plan can determine the extent to which the additional elections will be permitted. Keep in mind that certain changes can create adverse selection and the changes cannot result in a discriminatory plan. Sample self-attestation language can be found here.
Health Care and Dependent Care FSA Claims – Plans may be amended to allow employees to use any amounts remaining in a health care or dependent care FSA at the end of a plan year or grace period ending in 2020 to pay or reimburse expenses incurred through December 31, 2020.
Increase in Health care FSA maximum carryover – Under Notice 2020-33, the health care FSA maximum carryover is increased for a plan year to an amount equal to 20% of the maximum health care FSA. The 2021 maximum is $550 (20% of $2,750, the indexed 2020 contribution limit).
HDHP Relief – The notice clarifies that the CARES Act* provisions allowing a HDHP to cover telehealth and remote care services before the deductible has been met through the end of the plan year beginning on or before December 31, 2021 can be applied retroactively to January 1, 2020.
*CDB sent an email with the CARES Act updates and supporting employee communication pieces on March 23, 2020. If you would like another copy sent, please contact your Account Manager.
What needs to be done if you want to change your FSA/Cafeteria Plan
To take advantage of the relief pertaining to the cafeteria plans from the IRS Notices 2020-29 & 33, you can request a plan amendment(s) from your CDB Account Manager.
You can select from the following amendments:
Increase in carryover amounts
Health care and Dependent Care FSA claim extension
Amendments for the 2020 plan year must be adopted on or before December 31, 2021 and may be effective retroactively to January 1, 2020
The U.S. Department of Labor’s Employee Benefits Security Administration (EBSA) issued Frequently Asked Questions
under the Consolidated Omnibus Budget Reconciliation Act (COBRA) and revised COBRA model notices. Custom Design Benefits will use these model notices to notify plan participants and beneficiaries of their rights under COBRA and qualified beneficiaries of their rights to elect COBRA, keeping you in compliance with these changes.
In general, COBRA allows employees (and their families) who would otherwise lose their group health coverage due to certain life events to continue their same group health coverage. These events include termination or reduction in hours, death of a covered employee, divorce or legal separation, Medicare entitlement and loss of dependent status. COBRA generally lasts for 18 months but, in some cases, can last up to 36 months.
Under COBRA, group health plans must also provide covered employees and their families with certain notices explaining their COBRA rights. The revised model notices provide additional information to address COBRA’s interaction with Medicare. The model notices explain that there may be advantages to enrolling in Medicare before, or instead of, electing COBRA. It also highlights that if an individual is eligible for both COBRA and Medicare, electing COBRA coverage may impact enrollment into Medicare as well as certain out-of-pocket costs.
These documents will provide important information to COBRA-eligible individuals as they make healthcare choices for themselves and their families while assisting employers that must comply with the notice requirements under COBRA.
Custom Design Benefits
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