As businesses reopen, employers should be aware of eligibility determinations and the impact of new IRS notices and U.S. Department of Labor guidance related to re-enrolling employees in health and welfare plans, including ACA reporting and new COBRA rules. 

The agencies are extending certain timeframes otherwise applicable to group health plans, disability and other welfare plans, pension plans, and their participants and beneficiaries under the Employee Retirement Income Security Act and the federal tax code.

The changes provide immediate relief designed to preserve and protect the benefits of participants and beneficiaries in all employee benefit plans across the U.S. during the pandemic.

A first step to administering benefits as employees return to active employment is to determine that coverage is consistent with the provisions of the plan document.

The official plan document as well as ancillary documents such as benefit guides, summary plan descriptions, and other communications should provide clear rules on eligibility. 

Eligibility

Generally, an employee’s eligibility for enrolling in health and welfare plans is premised on whether or not the employee is classified as a full time employee for ACA purposes.

For furloughed employees returning to work, if working a full-time schedule, they are eligible for and should be offered medical benefits. 

In addition to the ACA rules, plan documents determine employee eligibility for participation in health and welfare plans. Employers may amend their health and welfare plans for employees. 

Furloughed employees returning to full-time work are eligible for and should be offered medical benefits.

In response to the COVID-19 pandemic, IRS Notice 2020-29 provides more flexibility with respect to when an employee can make a mid-year change to employer-sponsored health coverage.

The notice temporarily suspends long-standing regulations and allows employers to amend Section 125 cafeteria plans in calendar year 2020 to allow eligible employees to make prospective election changes (including an initial election) regarding employer-sponsored health coverage, a health FSA, or a dependent care assistance program. 

Employers should use extra care and caution when reporting the status of furloughed workers on IRS Forms 1094-C and 1095-C.

COBRA

The method an employer chooses to determine whether or not an employee was considered a full-time eligible employee during a furlough period and exceptions to the reporting rules make it likely employers will incorrectly report the status of furloughed workers.

IRS penalties for incorrect reporting can be significant and it is suggested employers consult with legal counsel when preparing ACA forms for 2020.  

Guidance issued by the DOL and IRS suspends key election and payment deadlines for COBRA during the “outbreak period” of the pandemic (beginning March 1, 2020 through the 60th day following the expiration of the COVID-19 National Emergency declaration).

The guidance suspends an employee's obligation to pay for COBRA benefits although coverage must remain active.

Employees have the usual 60 days to elect COBRA that will begin running the day after the outbreak period ends. 

The guidance suspends the employee’s obligation to pay for the benefits until the outbreak period ends although coverage must remain active during the period and claims will not be denied.

While employers are not required to forgive the debt for unpaid COBRA coverage, collecting it may be impractical or impossible and employers and insurers may be left paying for the claims incurred during the outbreak period.