What Recent Notices Mean for Your Employee Benefits and COBRA

It’s been a busy few weeks for employee benefits and COBRA changes. We wanted to update you on the latest notices that have been issued by federal agencies. 

On April 28, 2020, the U.S. Department of Labor and IRS issued EBSA Disaster Relief Notice 2020-01, which granted a temporary extension of run-out periods for Flexible Spending Accounts (FSAs) and Health Reimbursement Arrangements (HRAs). It also granted a temporary extension of certain deadlines for sending notifications, electing, and paying for COBRA continuation coverage during the COVID-19 outbreak.

Additionally, on May 12, 2020, the IRS issued Notice 2020-29 and Notice 2020-33, which provide participants in Medical FSAs, Dependent Care FSAs, Individual Coverage HRAs (ICHRAs) and High-Deductible Health Plans (HDHPs) with temporary help during the COVID-19 pandemic. 

Here’s how each notice affected your plans: 

EBSA Disaster Relief Notice 2020-01

FSAs and HRAs

• FSA and HRAs were granted a temporary extension of run-out periods. These extensions are retroactive to deadlines occurring from March 1, 2020 until 60 days after the COVID-19 National Emergency is declared over or until one year has passed, whichever occurred first. The run-out extension gives participants additional time after the COVID-19 National Emergency is declared over to submit claims for any active plan year they are enrolled in that has a run-out period ending during the relevant timeframe (March 1, 2020 until 60 days after the end of the COVID-19 National Emergency or until one year has passed, whichever occurred first).

COBRA

Under this temporary extension, qualified beneficiaries and COBRA members have extra time to send certain notifications about COBRA coverage, to elect COBRA coverage, and to make premium payments. These changes are retroactive to any deadline occurring from March 1, 2020 until 60 days after the COVID-19 National Emergency is declared over or until one year has passed, whichever occurred first.

• Election Period Extension: Prior to the temporary rule change, qualified beneficiaries had 60 days from the date of the Specific Rights Notice (SRN) to elect COBRA. With this COBRA election period extension, the period from March 1, 2020 to 60 days after the end of the National Emergency is disregarded or until one year has passed (whichever occurs first) in determining the end of the 60-day COBRA election period.
• Grace Period Extension: Prior to the temporary rule change, COBRA members had a 30-day grace period to pay monthly COBRA premiums in order to maintain coverage, and a 45-day grace period to make an initial payment upon first electing COBRA coverage. With this COBRA grace period extension, the period from March 1, 2020 to 60 days after the end of the National Emergency is disregarded or until one year has passed (whichever occurs first) in determining the end of the COBRA premium payment periods.
• Second Qualifying Event and Disability Notifications: Prior to the temporary rule change, COBRA members had 60 days to notify their administrator of a second qualifying event that would extend the COBRA coverage period from 18 months to 36 months. COBRA members also had 60 days to notify their administrator of receiving a Social Security Administration disability determination to extend the COBRA coverage period from 18 months to 29 months. With this COBRA notification extension, the period from March 1, 2020 to 60 days after the end of the National Emergency is disregarded or until one year has passed (whichever occurs first) in determining the end of the required notification periods for a second qualifying event and disability determination.

On October 6, 2021, the IRS released additional guidance explaining how the extensions apply to initial and subsequent premium payments. Click here for more details.

Notice 2020-29 and Notice 2020-33

Medical FSAs/Dependent Care FSAs

• Employers may allow employees to newly elect, change or revoke a Health or Dependent Care FSA election in the middle of a plan year. Prior to this Notice, the employee needed to experience an IRS-approved qualifying event in order to make mid-year changes. Notice 2020-29 temporarily waives that requirement. This optional relief applies to mid-year elections made during calendar year 2020.
• Employers may allow their employees to tap into unused funds from any FSA plan with a grace period or plan year that ends in 2020. These unused funds can then be used on medical care or dependent care expenses incurred through December 31, 2020. 

Medical FSAs 

• In addition to the above changes, the amount a Medical FSA participant can carry over from one plan year to the next year is now $550 (an increase of $50). This change is in effect for any plan year that began on or after January 1, 2020. In future years, the carryover amount will be indexed for inflation.

ICHRAs

• Employers may now reimburse employees who participate in an ICHRA for their individual insurance premium expenses paid prior to the start of their ICHRA’s plan year, as long as the insurance premiums being reimbursed are for the same plan year as the ICHRA. That means if an employee pays for part or all of his/her individual insurance prior to the ICHRA’s plan year, the employer can now reimburse those expenses immediately when they’re paid rather than requiring the employee to wait until Day 1 of the ICHRA’s plan year.

HDHPs

• Telehealth and remote care expenses may now be covered by an HDHP, even if the employee has not reached his/her deductible. This relief is in effect for plan years beginning on or before December 31, 2021 and applies to services provided back to January 1, 2020. This is a retroactive expansion of the CARES Act, which allowed these expenses to be covered from March 27, 2020 (the date the CARES Act was signed).

Keep up to date on the latest news regarding your employee benefits by checking out our COVID-19 resource page.

The information in this blog post is for educational purposes only. It is not legal or tax advice. For legal or tax advice, you should consult your own counsel.