Updates for COBRA & Cafeteria PlansPresented by Darren Ambler, Principal, Managing ConsultantMay 27, 2020

Topics for Discussion• COBRA & Qualifying Events

o “Outbreak period”o Temporary extension of election & payment periodso Temporary change to notice periods for QE’so New model Election Notice for COBRA

• Changes to Cafeteria Plan Due to Pandemico Mid-year election changes for health planso Mid-year election changes for Flexible Spending Accounts (FSA)o Extension of grace periods for FSA’so Carryover limit for Medical FSA

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We Welcome Your Questions

We anticipate that the questions we receive during this presentation

may be very specific to a group plan, or the specific timing of an

event. With that in mind we will be responding by email to questions

that are submitted.

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Extended Timelines During the Outbreak Period

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Extended Time Periods to Elect & Remit Payment for COBRA Coverage

• The COVID-19 “outbreak period”• Outbreak period began on March 1, 2020• Outbreak period ends 60 days following the date

the COVID-19 national state of emergency is declared to have ended (has not yet ended)

• Employers must disregard statutory deadlines during the outbreak period

• 60-Day election period• 45-day payment period• 14-day deadline for plan administrators to furnish

COBRA election notices• 60-day deadline for individuals to notify the plan

of a determination of disability• 30-day COBRA premium remittance grace periods

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COBRA timeline as we know it prior to outbreak period

April 1, 2020

• Joe receives his COBRA election notice

May 30, 2020

• Final day that Joe can make his election to continue coverage

July 14, 2020

• Last possible day to remit premium payment if Joe waited until May 30th

to elect coverage

Joe works for XYC, Inc. and participates in the group health plan. He experiences a layoff on from his job on March 31, 2020. Joe is provided with a COBRA election notice on April 1, 2020.

COBRA timeline during the outbreak period – Example 1

Clock begins to tick when the outbreak period ends

April 1, 2020

• Joe receives his COBRA election notice

• Election period has not yet begun

September 29, 2020

• Final day that Joe can make his election to continue coverage

• 60 days after July 30th

November 12, 2020

• Last possible day to remit premium payment if Joe waited until September 29th to elect coverage

Joe works for XYC, Inc. and participates in the group health plan. He experiences a layoff on from his job on March 31, 2020. Joe is provided with a COBRA election notice on April 1, 2020. On May 31, 2020 the national state of emergency ends.

COBRA timeline during the outbreak period – Example 2

Clock begins to tick when the outbreak period ends

April 1, 2020

• Joe receives his COBRA election notice

• Election period has not yet begun

April 30, 2020

• Joe makes his COBRA election and sends the signed notice back to the plan

September 13, 2020

• Last possible day to remit premium payment

• His 45 clock started ticking on July 30th

Joe works for XYC, Inc. and participates in the group health plan. He experiences a layoff on from his job on March 31, 2020. Joe is provided with a COBRA election notice on April 1, 2020. On May 31, 2020 the national state of emergency ends.

COBRA timeline during the outbreak period – Example 3

Clock begins to tick when the outbreak period ends

February 15, 2020

• Joe elects to continue his coverage as a COBRA participant and remits premium payment shortly thereafter

April 15, 2020

• Joe stops making payments towards his COBRA coverage

• Joe does not notify plan of any intention to terminate coverage

August 29, 2020

• Last possible day to remit back due premium payments (30 days after outbreak period ends)

Joe works for XYC, Inc. and participates in the group health plan. He experiences a layoff on from his job on February 14, 2020. Joe receives his COBRA election notice on February 15, 2020. On May 31, 2020 the national state of emergency ends.

What if someone was in the middle of one of the election and/or payment periods when the outbreak period began?

• The administrator must disregard the outbreak period – those days are not counted

Example: If a former employee was provided with a COBRA letter 12 days prior to the outbreak period, that person will have 48 days following the end of the outbreak period to make their election

Do I need to send out a revised COBRA notice?

COBRA Best Practices & Premium Payments

• Our recommendation is to terminate coverage effective the date of the qualifying event, or the last date of the month in which the qualifying event occurs

• Be consistent in practice• Termination of coverage reduces liability and generally speeds up process for election and

premium remittance • If contacted by a provider regarding proof of coverage, the plan must advise providers that

the individual is covered subject to payment of the COBRA premiums. Once premiums have been paid, claims incurred during the covered period will be paid.

• Add COBRA participant back to plan retroactive to the date coverage ended (no gap)• Premium payments during the outbreak period

• When employee elects COBRA continuation and remits payment, payment must be made retroactive to the coverage effective date to prevent gaps in coverage – no change

• If a participant misses a payment, or payments, during the outbreak period, the participant must remit ALL past due premium within 30 days after the outbreak period ends.

• If only a portion of back due amount is paid it can be applied to months paid and coverage can be terminated

Similar application of Rule for HIPAA Special Enrollment Periods (Certain Qualifying Events)

• Loss of coverage by employee or dependents under another group health plan or insurance

• Gain of dependent eligibility due to birth, marriage, adoption

• Any other circumstance for which HIPAA requires a special enrollment period

• No notification or plan document amendments are required

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New Model COBRA Notices (have nothing to do with the outbreak period)

• Interaction between Medicare eligibility and COBRA coverage is finally spotlighted

• Notice now explains the 8 month “Special Enrollment Period” (SEP) that begins on the earlier of:

• The month after your employment ends; or• The month after group health plan coverage

based on current employment ends.• If the SEP applies, and the person does not

enroll in Medicare within 8 months, the penalties for not having Medicare coverage will begin accruing

• Approximately 10% for each 12-month period without coverage

• Penalties apply for the remainder of your life• Currently more than 700,000 Medicare

participants are paying a penalty

EFFECTIVE IMMEDIATELY

Temporary Changes to Cafeteria Plans

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Mid-Year Election Changes for Group Health Plans

• Make a new election if initially declined coverage

• Revoke existing election and make new election to enroll in different coverage with the same employer

• Revoke existing election with written attestation that the employee is enrolled or will enroll in other health coverage not sponsored by employer.

Effective Through December 31, 2020

Optional - Employers may, but are not required to, permit any of the following prospective elections.

Mid-Year Election Changes for Flexible Spending Accounts

• Revoke election, make an election, or decrease or increase existing election for FSAs and DCAPs

• Mid-year elections/changes are prospective only

• Elections that will result in underfunding an account can be disallowed

• Plans that previously permitted mid-year election changes enjoy retroactive relief back to January 1, 2020

Effective Through December 31, 2020

Optional - Employers may, but are not required to, permit any of the

following prospective elections

Approach to Mid-Year Changes

Health Plan Changes• Low demand from employees• Mid-year changes can create liability for a plan as it may allow a potential high claimant to join

the plan• Allowing changes between plans will change the funding/budget model. If most changes

result in employees moving to a lower cost option, this may result in underfunding of plan• Requires amendments to plan documents and employee communication

Flexible Spending Accounts• High demand from employees• Employer liability is preventable (disallow underfunded elections)• TPA’s are amending plan documents (in many cases automatically)

Extended Grace Period for FSA and DCAP

• Optional, not required• Allow unused funds remaining at

the end of the grace period, or plan year ending in 2020, to reimburse qualified expenses through December 31, 2020

• Relief does not apply to plans that did not have a grace period in place for the 2019 plan year

FSA Carryovers

Effective for plan years starting in 2020, the

maximum FSA carryover limit is increased from $500

to $550

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Thank You For Joining Us

Be Safe, Be Well.

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