COVID-19 has dominated the agenda for health and welfare benefits in 2020. From suspended deadlines to mid-year election changes to enhanced cost-free coverage, the pandemic has resulted in significant changes to the design and operation of many health and welfare plans. As the year comes to a close, employers should consider whether they have any unfinished business to accomplish with these plans.
- Employers should consider end-of-the-year plan amendments to document mid-year changes resulting from the pandemic and related government action.
- Employers should evaluate whether they have appropriately notified employees of changes in benefits, particularly those that have resulted in changes to any Summary of Benefits and Coverage.
- Employers should evaluate plan administration in the face of extended plan deadlines.
The Bottom Line
The temporary nature of many of the new rules may influence how employers choose to respond, but it does not relieve them of the responsibility for compliance.
Unsurprisingly, COVID-19 has dominated the agenda for employee benefits in 2020. From suspended deadlines to mid-year election changes to enhanced cost-free coverage, the pandemic has resulted in significant changes to the design and operation of many health and welfare plans. As the year comes to a close, employers should consider whether they have any unfinished business to accomplish with these plans. The following list includes some of those considerations.
Cafeteria Plans Changes
Addition of mid-year election change opportunities. Generally, elections for benefits under a Section 125 Cafeteria Plan must be irrevocable for a plan year. COVID-19, however, changed how many employees need and use certain benefits. Some employees may have looked to obtain or improve their health coverage during the pandemic, while others whose hours were reduced may have wanted a less expensive option. Employees may have found themselves unable to incur medical or dependent care expenses to match contributions to their spending accounts. IRS Notice 2020-29 allowed employers to permit eligible employees to make certain mid-year election changes under the employer’s Section 125 Cafeteria Plan that would otherwise not have been permitted. For example, an employer may have allowed employees to enroll in coverage or change options or stop contributing toward a health or dependent care flexible spending arrangement (FSA).
Extension of period for incurring FSA expenses. IRS Notice 2020-29 also permitted certain employers to extend the period during which employees may incur expenses that could be applied against an FSA. For plan years or grace periods ending in 2020, an employer may have permitted participants to use amounts remaining in their health and dependent care FSAs at the end of the plan year or grace period to pay for expenses incurred through December 31, 2020.
The decision as to whether and how to implement these changes was left to the employer. However, if an employer did implement these changes, it should adopt appropriate changes to the plan document before December 31, 2021, which may be retroactive to January 1, 2020.
Notifying Employees of Changes that Affect Summaries of Benefits and Coverage
The Families First Coronavirus Response Act (FFCRA) and the Coronavirus Aid, Relief, and Economic Security (CARES) Act, as well as agency guidance regarding these laws, require and permit health plan changes that may need to be reflected in a Summary of Benefits and Coverage (SBC). Most significantly:
- During the COVID-19 public health emergency, health plans must cover screening for COVID-19 and related physician, emergency room, and other diagnostic expenses without any cost-sharing to participants.
- For plan years beginning before 2022, high deductible health plans (along with other health plans not subject to mandatory deductibles) may cover COVID-19 treatment and telehealth services without cost sharing.
- As vaccines become available, they must also be covered without cost-sharing. Plans must make this change within 15 business days of the availability of governmental approval of a vaccine, which may be imminent.
A Final Rule from the U.S. Department of Labor, the IRS, and Treasury extends various deadlines for participant notices and elections, including deadlines for:
- Special enrollment elections
- Certain COBRA notices and elections
- The filing of ERISA claims and appeals
The legislative and regulatory response to COVID-19 raises a number of other issues for sponsors of health and welfare plans. For example, employers may consider:
- Amending health FSA and Health Savings Account coverage to include over-the-counter medications without a prescription and permitted menstrual care products;
- Whether disregarding required coverage for COVID-19 testing and related expenses will help them meet quantitative tests under the Mental Health Parity and Addition Act;
- Waiving certain standards for rewards under wellness programs because of the impact of COVID-19 on participants;
- Re-evaluating their compliance with nondiscrimination requirements for dependent care assistance plans in view of the very significant changes in needs for and the availability of child care as a result of the pandemic.
The temporary nature of many of the new rules adds to the complexity for employers. Measures taken may need to be undone before the end of the next year. The transitory nature of the rules may influence how employers choose to comply. For example, an employer may choose to provide a brief supplement to COBRA notices, rather than amend the notices themselves. However, the temporary nature of the rules does not relieve employers of their compliance responsibilities for their health and welfare benefit plans.