Wrangle has received scores of questions on how the various federal legislative acts responding to the COVID-19 pandemic might impact Plan Documents and Form 5500s. Please read below for Wrangle’s responses to some of the more common questions.
1. Do you have any recommended changes for the WRAP Doc and the accompanying SPD that employers might need to consider in response to COVID-19?
Yes, each plan sponsor should anticipate the need to amend their plan documents and to distribute the corresponding summary of material modification (SMM) within 210 days after the end of the plan year, in which these changes take effect.
Please note: we expect more regulatory changes in response to COVID-19 to come in the future.
Currently, we expect to include the following changes to our plan documents (other vendor’s documents may need different revisions).:
- Removal of the Affordable Care Act’s (ACA) limitation on purchases of over-the-counter medications and drugs from account-based group health plans (e.g. Health FSAs, HRAs, HSAs), along with the inclusion of over-the-counter menstrual care products.
- Revisions to our “Coverage During a Leave of Absence” section in the Summary Plan Description (SPD) to allow for the two new benefits-protected COVID-19 leaves, provided for in the regulations for the Families First Coronavirus Response Act (FFCRA) (e.g. emergency FMLA and COVID-19 paid sick leave).
The most common discretionary COVID-19 amendment requested at this point in time is the addition of furlough language, in which Plan coverage continues during a specific period of time (e.g. April 1, 2020 through May 31, 2020) related to an involuntary leave of absence and/or a reduction of hours. See Question #2 below.
Alternatively, if there is a layoff or reduction of hours that triggers COBRA with no expansion of eligibility, a plan sponsor may choose to subsidize part or all of the COBRA coverage temporarily, during the COVID-19 period without amending most plan documents. So long as all of their plan’s carriers, stop-loss issuers, and contract administrators are on board with such COBRA procedures.
2. Our client does not have a furlough policy in their Plan Document. How do we proceed to help them design a furlough policy, and how do they implement it?
Steps to start the process:
- Contact the affected insurance issuers, stop loss insurers, and TPAs to confirm that they will cover employees on furlough for a period time. Their benefit documents may need to be amended. Leaving ineligible employees on plans could cause an insurer or stop-loss issuer to deny the COVID-19 period claims.
- Consider the ACA employer mandate for applicable large employers. Terminating group health plan coverage for an employee on furlough may cause a penalty for failure to offer coverage to 95% of FT employees. COBRA coverage should remain affordable to avoid this penalty.
If Wrangle prepared the plan documents for a client who wants to make a COVID-19 eligibility change, we can amend the plans by adding the specific language provided by the plan sponsor’s legal advisor, or we can use our standard COVID-19 furlough language, which requires specific beginning and end dates.
3. How does the plan sponsor distribute an SMM? Are electronic distribution procedures still an option if they are teleworking from home?
Good News – Yes, the employee can still receive the SMM electronically at home and no prior consent by the employee is required. SMMs may be delivered to employees electronically if:
- The employee has the ability to effectively access an electronic copy of the SMM at any location where the employee is reasonably expected to perform his or her job duties
A notice must be sent either electronically or in paper form to participating employees and beneficiaries at the time the SMM is provided electronically. The notice must:
- Provide details regarding the significance of the SMM;
- Advise participants of their rights to have the opportunity, at their worksite or home, to access documents furnished electronically and to request and receive (free of charge) paper copies of the SMM; and,
- If the SMM disclosure includes personal information relating to an individual’s accounts and benefits, the plan must take reasonable and appropriate steps to safeguard the confidentiality of the information.
- This notice is required each time an ERISA disclosure is provided electronically and may be included with other disclosures made at the same time as long as the notice is sufficiently conspicuous to alert participants and beneficiaries to the electronic disclosure.
4. Are mid-year election changes allowed due to COVID-19?
COVID-19 by itself does not allow a mid-year election change. A qualifying event is needed in order to have a mid-year change, such as the loss of coverage from the spouse’s benefit plan. Nevertheless, read on for other considerations.
Considerations for election change requests during the COVID-19 global pandemic:
- Exercise caution when an insurer waives its policy requirements and permits special enrollments due to COVID-19. Consider ERISA and your Section 125 plan’s list of permissible election changes. Permissible election changes under the cafeteria plan regulations currently do not include a “public health emergency” type qualifying event.
- An employee on furlough (with no change to plan eligibility) will most likely not meet the cafeteria plan’s qualifying life event requirements for changing a group health plan election, BUT may be able to change a dependent care FSA election due to a child care facility closure or due to being at
It’s important to remember that the employment status change event under the cafeteria plan regulations requires a corresponding loss of group health plan eligibility. In addition, the reduction of hours qualifying life event added after the Affordable Care Act was enacted doesn’t require a change in eligibility but does require an employee to certify that they intend to enroll in other minimum essential coverage.
1. Participant counts to note on the 2020 Form 5500s
|How will participants be counted if:||Answer:|
|1. They are on furlough and still covered by benefits
2. They are on furlough and benefits are no longer available
3. They are on COBRA
4. They are laid off or terminated
1. They are counted as a participant.
2. They are not counted as a participant.
3. They are counted as a COBRA participant (as a reminder: COBRA has its own line on the 5500’s page 2- they are listed under 6b). To learn which benefits apply to COBRA; see the note below.
4. They are not counted as a participant, assuming they do not have coverage from the employer.
2. Are Telehealth/Teledoc type benefits ERISA reportable?
|Telehealth type benefit Scenarios:||Answer|
|1. If it is embedded in the fully insured or self-insured medical
2. If it is a separate policy/contract from the medical and the Plan Sponsor pays the fees
3. If it is a separate policy/contract from the medical and the broker pays the fees
|1. Yes, however, not via a separate Schedule A. Instead, just 4A and insurance or general assets are checked.
2. Yes, via a separate Schedule A.
3. No, if this is provided by the broker as a service for their clients.
3. Can we use a special extension for the Form 5500 if the client is not currently in operation?
We are still waiting for the official word from the DOL on when to use a special extension. True, President Trump has declared a public emergency, which opens the door to have a special extension; however, the IRS and DOL have not given the green light to move forward on the special extension for the Form 5500s. Wrangle does suspect that the January 1 Plan years will receive the special extension at some point. On March 16th, the American Retirement Association (ARA) requested to Congress for the deadline to be extended to October 15th – other organizations such as the ASPPA have made the requests as well.
4. What do we do if we cannot get ahold of the client to sign the 5500?
If there is no one at all to sign, the Form 5500 cannot be e-filed. It will have a penalty fee of $10 per day from the original deadline if it is filed past that due date or the extended due date.
5. If we don’t have all of the information for the 5500 and it is due, do we e-file anyway?
Yes, the 5500 can be e-filed with “placeholder” information and then amended when all required information becomes available. However, if this is a trust and the IQPA report is not available, the decision to e-file without it should be considered carefully. The DOL under normal circumstances has not accepted trusts without the IQPA reports. Penalty fees have been issued. The plan sponsor should see the advice of an ERISA attorney on what is best to do.
Benefit Change for FSA:
Health savings accounts (HSAs) and flexible spending accounts (FSAs) may be used to purchase over-the-counter drugs without a physician’s prescription. They may also be used to purchase menstrual care products including tampons, pads, liners, cups, sponges, and similar products. This takes effect for 1/1/2020.