By Richard Loebl and Mark Casciari

Seyfarth Synopsis:  The central tenets of ERISA are to provide as much freedom as possible, within minimal parameters, to draft ERISA plans, and then to honor the terms of the plans.  COVID-19 may very well cause increased ERISA plan claim filings, so now is the time for plan sponsors to review their ERISA plans and consider (or reconsider) plan provisions that manage an increased claim risk.

The COVID-19 pandemic seems likely to spawn many claims for ERISA benefits, whether under health, retirement or disability plans, and now is the time to consider anew proactive risk management steps.  A recent decision from the Court of Appeals for the Tenth Circuit, Ellis v. Liberty Life, No. 19-1074 (10th Cir. May 13, 2020), illustrates the particular importance of the risk management tool of including a favorable choice of law provision in an ERISA long-term disability plan that provides benefits through an insurance policy.

The issue in Ellis was whether the federal district court’s review of the plan administrator’s denial of long-term disability benefits was subject to an abuse of discretion standard or subject to de novo review.  The lawsuit was filed in Colorado.  Colorado’s insurance regulations, like those in many states, forbid insurance policies from giving insurers, plan administrators or claims administrators discretion to interpret the policy’s terms in making benefits decisions.  Such laws have been challenged by relying on ERISA’s general preemption of state law that relates to an ERISA plan, but that preemption provision contains an exception for state laws regulating insurance.

However, the plan here contained a choice of law provision stating that if there was an issue of state law, then Pennsylvania law governed.  The employer was both incorporated and headquartered in Pennsylvania.  Unlike Colorado, Pennsylvania does not have an insurance law that prohibits discretionary clauses in insurance policies.  The question was whether the choice of law provision should be honored.

The Court held that such a clause should be enforced so long as the chosen state has a valid connection to the plan.  As the employer was both incorporated and headquartered in Pennsylvania, the Court found the choice of law provision applied and thus reviewed the claim for abuse of discretion.  Applying this standard, the Court affirmed the decision of the insurer.

Employers should take the opportunity now to review their ERISA plans to consider adding risk management provisions.  And such provisions may go beyond a choice of law.  For example, we cannot but wonder if the Ellis case would have proceeded more smoothly to its ultimate conclusion if there had been a forum selection clause mandating that the litigation be held in Pennsylvania.  In addition, the defendant likely could have avoided this entire inquiry if the plan sponsor had drafted a plan document, separate from the insurance certificate, that vested the insurer with discretion.  There are other plan-based risk management tools, such as plan limitations or arbitration provisions, which might be applied in other situations.  Consult your Seyfarth benefits attorney or other contact for more information.

Seyfarth Synopsis: The IRS has issued some initial guidance on the coronavirus-related relief for retirement plans (and IRAs) under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) in the form of Q&As on its website. Most of the Q&As address coronavirus-related distributions (“CV Distributions”), while one Q&A provides some IRS insight relating to the loan relief, referencing an old IRS Notice that answered questions about the loan relief issued after Hurricane Katrina. This blog post discusses the Q&A relating to the CARES Act loan relief. The Q&As related to the CV Distributions are discussed in a separate post.

Earlier this week, the IRS released Q&As on its website related to the loan relief provided under the CARES Act. These Q&As specifically state that the IRS intends to release additional guidance on this provision in the “near future,” which is anticipated to follow the principles of IRS Notice 2005-92, issued after the enactment of analogous relief legislation following Hurricane Katrina (“KETRA”). Given the similarity in the statutory language of the CARES Act and KETRA, we expect that will be the case.

As discussed in more detail in a prior post, in addition to increasing the amount that a “qualified individual” may borrow, the CARES Act also allows a qualified individual to delay certain repayments for plan loans outstanding on or after March 27, 2020. The specific language in the CARES Act provides that the due date for any loan repayment due during the period from March 27, 2020, until December 31, 2020 (the “Suspension Period”) may be delayed “for 1 year.” The language in the CARES Act also provides that the one year delay is disregarded for purposes of applying the maximum loan term (e.g., 5 years for a general purpose loan).

Many plan sponsors have opted to allow participants to suspend loan repayments otherwise due during the Suspension Period. However, there are several open questions with respect to what needs to happen at the end of the nine-month Suspension Period: When loan repayments recommence on January 1, 2021, is the loan re-amortized at that point to account for the suspension period? Or, is the loan not re-amortized until one year after the date payments were suspended? Is each suspended loan repayment separately delayed for one year? Or, is an additional year just added to the end of the original term of the loan?

In Q&A-8, the IRS sheds some light on what is supposed to happen at the end of the Suspension Period. First and foremost, the IRS refers back to the language in the CARES Act, reiterating that any repayment due during the Suspension Period may be delayed under the plan for up to one year. However, the IRS also refers us to section 5.B of Notice 2005-92.

The loan relief in the CARES Act tracks almost verbatim the loan relief provided under KETRA, with one primary difference – under KETRA, the suspension period was approximately 16 months, running from August 25, 2005 until December 31, 2006, which was longer than the nine month Suspension Period under the CARES Act. Notice 2005-92 provides a “safe harbor” for satisfying the loan suspension under KETRA. The Notice includes an example of the safe harbor, describing the administration of and calculations related to a loan taken by a qualified individual who suspends loan repayments three months after the start of the permissible suspension period.

In the example, the participant took a loan on March 31, 2005 to be repaid over the course of a 5-year period. The participant’s loan repayments were suspended for a 13-month period beginning on December 1, 2005 and ending on December 31, 2006. The example explains that in this scenario, loan repayments resume on January 1, 2007 and are re-amortized at that time to account for interest that accrued during the suspension period and to reflect repayment by April 30, 2011 (i.e., the original five-year term of the loan plus the participant’s 13 month suspension period).

While the example under Notice 2005-92 is not binding guidance for CARES Act loan suspensions, since the statutory language of the CARES Act is identical (other than the length of the suspension period) to the provisions of KETRA, the example from Notice 2005-92 offers a window into how the IRS will likely indicate that CARES Act loan suspensions should be administered. When applied to CARES Act loan suspensions, the example from Notice 2005-92 suggests the following:

  • When loan repayments recommence on January 1, 2021, they are re-amortized at that time to account for the suspension period specific to each particular CV Loan; and
  • The term of the participant’s loan is extended only by the period of time that loan repayments were actually suspended, and not by a year.

Despite the language in the CARES Act that extends the period for repayment of each suspended payment by one year, applying the safe harbor and example under Notice 2005-92, a participant will never be able to suspend repayments for one year, because the maximum Suspension Period is only nine months. Additional guidance from the IRS would be welcome, particularly in light of the contradictory language in the CARES Act stating that any repayment due during the Suspension Period may be delayed under the plan for up to one year (notwithstanding the same conflict between KETRA and Notice 2005-92). We eagerly await the promised additional guidance (and possibly even an example!).

Seyfarth Synopsis: The IRS has issued some initial guidance on the coronavirus-related relief for retirement plans (and IRAs) under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) in the form of Q&As on its website. Most of the Q&As address coronavirus-related distributions (“CV Distributions”), while one Q&A provides some IRS insight relating to the loan relief, referencing an old IRS Notice that answered questions about the plan distribution and loan relief issued after Hurricane Katrina. This blog post discusses the Q&As relating to the CV Distributions. The Q&A related to the CARES Act loan relief is discussed in a separate post.

Earlier this week, the IRS released Q&As on its website related to the CV Distributions now permitted pursuant to the CARES Act. These Q&As specifically state that the IRS intends to release additional guidance on this provision in the “near future,” which is anticipated to follow the principles of IRS Notice 2005-92, issued after the enactment of analogous relief legislation following Hurricane Katrina (“KETRA”). Given the similarity in the statutory language of the CARES Act and KETRA, we expect that will be the case.

As discussed in more detail in a prior post, the CARES Act allows IRA owners and retirement plan participants who are either diagnosed with the SARS-CoV-2 virus or with coronavirus disease 2019 (COVID-19) or whose spouse or dependent is diagnosed with the virus or disease to take distributions up to a total of $100,000 from January 1, 2020, to December 30, 2020 (“CV Distributions”). Alternatively, an individual is eligible for a CV Distribution if he or she experiences adverse financial consequences stemming from the virus or disease as a result of being quarantined, furloughed, laid off, having reduced work hours, being unable to work due to lack of child care, the closing or reduction of hours of a business owned or operated by the individual or other factors determined by Treasury. Adverse financial consequences experienced due to a spouse’s quarantine, furlough, lay-off, etc. do not qualify an individual for a CV Distribution under this statutory provision. Plan administrators and participants alike have been hoping for guidance that would expand the ability to take CV Distributions for participants in these circumstances. The Q&As merely indicate, however, that the IRS and Treasury have received and are reviewing comments requesting the expansion of these factors. Further, the Q&As clarify that the plan administrator may rely on an individual’s certification that he or she meets these requirements, unless the plan administrator has actual knowledge to the contrary.

CV Distributions may be included in income ratably over three years (i.e., 2020, 2021 and 2023), or a recipient may choose to include the entire amount in income in 2020. The CARES Act also allows a recipient to repay all or a portion of a CV Distribution to a defined contribution retirement plan or IRA within three years of the day following the date of the CV Distribution. The Q&As point to Notice 2005-92, describing similar KETRA relief, for examples on how repayments will work, subject to the issuance of further guidance. Under Notice 2005-92, if a taxpayer chooses to include CV Distribution in income over three years but repays all or part of that CV Distribution at one or more points during that three-year period, any repayment amount offsets the income inclusion required for the portion of the CV Distribution for the year in which the repayment is made. If a repayment amount is more than the CV Distribution amount that would be included in income under the three-year method in the repayment year, the taxpayer can carry the excess forward or backward. To carry it backward, the taxpayer would need to file an amended return for the prior year to reduce his or her gross income in that prior year by the amount of the excess repayment. The repayment to a plan or IRA is treated as though it were repaid in a direct trustee-to-trustee transfer.

Any CV Distribution from a plan should be reported on a Form 1099-R, and the Q&As state that the IRS plans to provide more guidance on this reporting later this year. Repayments of CV Distributions will be reported to the IRS by the taxpayer recipient on a Form 8915. Further, state tax rules may differ from these federal rules, so taxpayers should be certain to check the tax laws of their state when considering a CV Distribution.

The IRS also clarified that adding a CV Distribution to a plan is optional, and that plan sponsors can choose whether or not to permit them. Even if a plan does not permit these distributions, taxpayers who otherwise meet the requirements under the CARES Act for a CV Distribution and who otherwise qualify for a distribution under the terms of the particular plan (e.g., age 59½, hardship, following severance from employment) may treat such a distribution as a CV Distribution on the individual’s federal income tax return, and thus avail himself or herself of the optional three-year tax treatment and repayment option allowed for a CV Distribution.

The Q&As further clarify that plans that do not accept rollover contributions are not required to accept re-contributions of CV Distributions.

Remember, for plans that do adopt the CV Distribution provisions, amendments are generally not required to be adopted until the end of 2022 for calendar year plans.

Seyfarth Synopsis: Two recent lower court decisions provide a primer on when a prevailing party in an ERISA case may recover fees (as a fee award is not automatic) and a window into the future of video hearings to resolve fee motions.

Two interesting lower court decisions on attorney fee motions were recently issued from Judge Susan Brnovich of the federal District of Arizona and Judge Beau Miller in the District Court of Harris County, Texas of the 190th Judicial District. One decision presents a refresher course on the merits of ERISA fee motions and the other used the novel procedural approach of conducting a Zoom video hearing in lieu of live appearances.

The first decision, United Air Ambulance LLC, v. Cerner Corporation, et al., Case No. CV-17-04016 (U.S. Dist. Ct. D. Ariz., Apr. 14, 2020), addressed when prevailing ERISA plaintiffs may recover fees as instructed by the Court of Appeals for the Ninth Circuit. Judge Brnovich denied ERISA Section 502(g)(1) fees after carefully considering the following factors: (1) degree of the opposing party’s culpability or bad faith, (2) the ability of the opposing party to satisfy an award of fees, (3) whether an award of fees against the opposing party would deter others from acting under similar circumstances, (4) whether the party seeking fees sought to benefit all participants and beneficiaries under an ERISA plan or to resolve a significant ERISA legal question, and (5) the relative merits of the parties’ positions. The Court found that these factors split evenly, save for two, which tipped the scales against an award of fees to the plaintiff. The deterrence factor weighed against plaintiff because the case involved a unique set of facts, so no one else was likely to encounter the scenario at issue. The resolution of the case was not a benefit to all participants under the plan and resolved no significant legal question about ERISA, as it focused on procedural shortcomings. This decision is a reminder that, unlike the case with other federal statutes such as Title VII of the Civil Rights Act of 1964, ERISA fee motions by prevailing a plaintiff (or defendant) should not always be given a presumption of success.

In Ahmed v. Texas Fair Plan Assoc., Case No. 2016-09336, Judge Miller considered whether to grant a fee motion in an insurance case. Following the Texas Supreme Court’s order mandating that all hearings be conducted remotely, the Court held a one-day bench trial via Zoom.

The post-COVID-19 world will present many new ways of doing business, and we can foresee federal judges experimenting with Zoom hearings in lieu of expensive and now unwelcome travel. A good place to start may be with fee motions, as they are ancillary to the merits of the case. Video hearings will present new challenges for lawyers and clients, not the least of which are video quality and reliability, and maintaining eye contact in a virtual world. Savvy ERISA attorneys are likely to improve their command of video appearances and confront the unique challenges of video persuasion, as we enter the brave, new world of the e-trial attorney.

Seyfarth Synopsis: On April 9, 2020, the IRS issued Notice 2020-23, extending federal tax filing deadlines and payment obligations to July 15, 2020 for certain items otherwise due to be performed from April 1, 2020 through July 14, 2020. Notice 2020-23 extends the period for performing 44 “time-sensitive” employee benefit-related actions.

These time-sensitive actions were previously identified under Revenue Procedure 2018-58, which provides a standing list of actions for which the IRS can trigger extended deadlines in times of federally declared natural disasters or military actions, many of which are related to employee benefits matters (the “EB Time Sensitive Actions”). Notice 2020-23 provides a delayed deadline to July 15, 2020 for EB Time Sensitive Actions that would otherwise be due to be performed from April 1, 2020 through July 14, 2020 (the “Extension Period”), some of which are described below. Unlike the CARES Act relief, an individual (or plan sponsor) does not need to show that he or she was adversely impacted by COVID-19 in order for the Extension Period to apply to the EB Time Sensitive Actions. The scope of the relief is broad, including relief for defined contribution and defined benefit plans, ESOPs, welfare plans, and individual plan participants. The PBGC issued similar relief for certain plan filings in concert with the IRS.

  • Relief for Defined Contribution Plan Acts. The Notice covers a number of defined contribution plan-related acts that may be postponed until July 15, 2020 including:
    • The 60-day window to roll over distributions from an eligible retirement plan (including an IRA) has been extended to July 15, 2020 if the deadline otherwise expired or will expire during the Extension Period. This may be helpful for participants who received a 2020 required minimum distribution before April 1, 2020 and would like to roll it over to an eligible retirement plan but are outside of the 60-day rollover period.
    • As described in a prior blog post, the CARES Act generally allows certain qualified individuals adversely impacted by COVID-19 to suspend loan repayments until the end of 2020. The relief provided by the Notice allows all participants, not just those impacted by COVID-19, to suspend until July 15, 2020 any loan repayments that are otherwise due during the Extension Period. Of course, any loan under which repayments are suspended during the Extension Period will need to be caught up or otherwise re-amortized once repayments re-commence.
    • The April 15, 2020 deadline for distributing 2019 excess deferrals (plus earnings) identified by the plan administrator or timely identified by the participant (by March 1st) has been extended until July 15, 2020.
    • The 90-day period for electing a permissive withdrawal of automatic contributions under an eligible automatic contribution arrangement, or EACA, is postponed until July 15, 2020, provided the deadline for making this election otherwise falls within the Extension Period.
  • ESOP-Specific Relief. Notice 2020-23 also postpones various deadlines for certain ESOP-specific administrative tasks until July 15, 2020, if the deadline would have otherwise expired during the Extension Period. The extension applies to the timing of elections and processing of distributions to former employees, repurchases of stock distributed by the ESOP and statutory diversification, as well as distribution of pass-through dividends and capital gains deferral elections for shareholders who sell stock to an ESOP.
  • Welfare Plans. While the Notice covers several welfare plan-related time sensitive items, much of the relief relates to plan year deadlines for cafeteria plans and flexible spending accounts, which typically operate on a calendar year and as a result are outside the Extension Period. Those situations eligible for relief under the Notice are therefore more unique.
  • PBGC Relief. Following the IRS’ lead in delaying certain deadlines, the PBGC also has provided relief under its disaster relief policy. PBGC premiums, reporting for unfunded defined benefit pension plans under ERISA 4010 and most other filings that are not expressly excepted, which are otherwise due during the Extension Period, are now also due on July 15, 2020. There are items on an “exceptions list” that are not covered by this relief, which filings include important or time-sensitive information involving the possibility of a high risk of significant harm to participants or to the PBGC’s insurance program. These items include, among others, advance notice of a reportable event under ERISA 4043, notices of large missed contributions, post-reportable event notices under ERISA 4043 and certain actions in connection with distress terminations. For those items on the “exceptions list,” filers may seek individual exceptions.

This deadline extension relief provides much needed clarification regarding upcoming tax and employee benefit-related deadlines. While we would all prefer to be back to work and back to our normal daily lives as soon as possible, we will continue to monitor these deadlines as it’s always possible that the IRS will grant further relief. In the meantime, continue to observe recommended safe distancing and face mask protocols, and stay safe.

By: Jonathan A. Braunstein

On April 13, 2020, the Federal Bureau of Investigation issued a press release warning the public about several emerging health care fraud schemes related to the COVID-19 pandemic.

The press release warns that, “[B]ad actors are selling fake COVID-19 test kits and unapproved treatments through telemarketing calls, social media platforms, and door-to-door visits. Many scammers are promising free care to patients in order to gain access to their personal and health insurance information, including their dates of birth, Social Security numbers, and financial data.”

Focusing on fraudulent COVID-19 testing schemes, the FBI warns the public to beware of individuals who contact you to tell you the government or government officials require you to take a COVID-19 test. These scammers will likely ask for your health insurance information, including your Medicare or Medicaid number, and other personal information. Once scammers obtain an individual’s personal information, they can use it to bill federal health care programs and/or private health insurance plans for tests and procedures the individual did not receive and pocket the proceeds. The FBI also cautions the public to beware of individuals unexpectedly offering to sell you a COVID-19 test kit or supplies. A physician or other trusted health care provider should assess your condition and approve any requests for COVID-19 testing. Some scammers are selling fake at-home test kits; some are even going door-to-door and performing fake tests for money. Legitimate tests are offered free to patients when administered by a health care professional.

Focusing on fraudulent COVID-19 treatment schemes, the FBI warns that scammers are selling fake cures, treatments, and vaccines for COVID 19. The FBI advises the public to ignore unsolicited offers for these fake procedures, and cautions against providing any personal information, including your financial information, Medicare or Medicaid number, or private health insurance information to anyone offering them. The FBI also warns the public to beware of scammers claiming to be medical professionals and demanding payment for treating a friend or relative for COVID-19. The FBI advises that if you do receive treatment for COVID-19, be sure to check the medical bills and the explanation of benefits from your provider, government health program, or insurance company. Also, check to be sure you are not billed for medical services you did not receive and that the dates of service are accurate; if you spot an error, call your medical provider and your insurance company.

The FBI encourages victims to immediately report suspected COVID-19 fraud to the National Center for Disaster Fraud Hotline at (866) 720-5721 or [email protected], or the FBI (visit ic3.gov, tips.fbi.gov, or call 1-800-CALL-FBI).

A link to the FBI press release can be found here: https://www.fbi.gov/news/pressrel/press-releases/fbi-warns-of-emerging-health-care-fraud-schemes-related-to-covid-19-pandemic

Fraudulent insurance and benefit claims cost the U.S. health care system hundreds of billions of dollars per year. It is appalling but not unexpected that fraudsters are exploiting opportunities presented by the current health care crisis. What remains to be seen is whether and to what extent they get away with it.

Seyfarth Synopsis: On April 11, the IRS, DOL and HHS issued a series of FAQs clarifying the scope of the FFCRA/CARES Act mandates relating to COVID-19 testing for group health plans and health insurance issuers. This post highlights the key takeaways from those FAQs.

As highlighted in our earlier blog post, it was only a few months ago that the Trump Administration issued a series of Executive Orders downplaying the significance of sub-regulatory guidance (or even formal guidance) that goes beyond the four corners of the law. That was pre-pandemic, and it appears the Administration has recognized that going through the formal rulemaking process to address the import of the FFCRA and CARES Act on group health plans would be fruitless as that could extend beyond the emergency period.

The DOL/HHS/IRS FAQs issued over the weekend attempt to clarify a number of burning questions that arose in the wake of the fast-tracked congressional action (covered here, here, here and here).  We attempt to summarize notable points from the FAQs below:

  • Scope of Plans Subject to Guidance. There has been some question as to which benefit programs, perhaps tangentially related to medical care, are covered by the new legislation.
    • Excepted Benefits. The FAQs confirm that the guidance only applies to “group health plans” and health insurance issuers, but not to excepted benefits offered through employers.
    • Retiree-Only Plans. Further, consistent with the statutory language, the FAQs provide that the FFCRA does not apply to “retiree-only” plans (i.e., those covering fewer than two active employees). Retiree-only plans may still desire to implement low-cost or no-cost testing, but they have more flexibility to do so (including, if desired, limiting or imposing cost-sharing in the non-network setting) because they are doing so at their discretion rather than in response to a mandate.
  • Effective Date/Expiration Date. The FAQs clarify that the guidance requiring free COVID-19 testing applies for services or supplies rendered on or after March 18, 2020, and expires on April 25, 2020, unless the public health emergency is extended. Of note, when published the FAQs indicated a June 16, 2020 expiration date, but they were quickly revised to provide for an April 25 expiration date, which is more consistent with the statutory language and the rules surrounding emergency declarations. It is possible that the original date reflected an anticipated extension of the emergency period, which we still fully expect will occur.
  • Scope of Coverage Requirements. The legislation appeared to limit required first dollar coverage to testing services, but left some room for interpretation as to what was covered and whether plans may impose other normally required conditions.
    • Mandate Includes Blood Tests to Detect Antibodies. In an important clarification, the FAQs clarify that plans must not only cover the costs of screenings to detect a current COVID-19 infection, but they also must cover blood tests to detect antibodies that would indicate the individual previously had COVID-19. It has been widely reported that these “immunity” tests are coming online shortly as an important component of “reopening” the country, but to date it wasn’t clear whether this was included in the testing mandate.
    • Coverage for Testing Relating to Other Respiratory Conditions. While the FAQs confirm that the plan must only cover the cost of services if the visit results in the order for or administration of a COVID-19 screening, they also clarify that if the visit results in other related respiratory tests, (e.g., influenza tests, blood tests), those services must also be covered by the plan at no cost to participants.
    • Limit on Medical Management Requirements. The FAQs confirm that the plan cannot impose cost-sharing, prior authorizations or medical management requirements on testing or related services. They clarify, however, that the no-cost mandate only applies to services that are “medically appropriate for the individual, as determined by the individual’s attending healthcare provider in accordance with accepted standards of current medical practice.” The FAQs go on to make clear that the plan/issuer/hospital/managed care organization is not the attending healthcare provider.
    • Reimbursement for Non-Network Providers. There was some confusion based on the drafting of the FFCRA (as amended by the CARES Act) as to whether the non-network provider mandate dictated the reimbursement rate for all services provide in a non-network setting in connection with a COVID-19 screening, or only for the testing. The law appears to only require that the provider publish a cash rate for the test itself (not for other services, including the office visit). That said, the FAQs appear to indicate that the DOL believes providers are required to post all related costs (and that the plan must reimburse for those costs or a lesser rate, if negotiated).
  • 60-Day Advance Notice Requirement Waived. Post-ACA, plans making mid-year changes that would impact the terms of their Summary of Benefits and Coverage (SBC) were required to provide 60 days advanced notice. The DOL has adopted a non-enforcement standard for purposes of implementing coverage to comply with the COVID-19 mandate or other optional design changes intended to enhance plan offerings to address the pandemic (e.g., expansion of telemedicine). The DOL would still require that plans provide notice of changes as soon as possible.
  • Covering COVID-19 Screenings Under an Excepted Benefit. Some employers have explored setting up a “COVID-19-testing-only” plan for part-timers and others who are not otherwise eligible for their health plan. In the normal course, such an offering would constitute a “group health plan,” subject to the various federal mandates, including the preventive care mandates, and rendering participants ineligible for Marketplace tax credits. As such, employers were shying away from taking this step. The DOL FAQs, however, suggest that it would be permissible to include COVID-19 diagnosis and testing in an EAP or an onsite clinic offering (benefits that could otherwise constitute excepted benefits) without rendering those benefits to be group health plans. Employers might now be more inclined to explore this route, especially because any such offering would be optional and not subject to the FFCRA/CARES Act mandates (e.g., employers could limit non-network testing or impose cost-sharing).

We expect that the agencies will eventually formalize this guidance through the official rulemaking process, but given the number of open issues that remain, the agencies may issue additional FAQs in the interim. For the time being, plan sponsors should continue to work toward implementing the required changes and notify participants in an expeditious manner in accordance with these guidelines.

By: Jonathan A. Braunstein

On March 23, 2020, the U.S. Department of Health and Human Services Office of Inspector General (“HHS-OIG”) issued an alert to the public about fraud schemes related to the novel coronavirus (COVID-19).

According to the alert, scammers are offering COVID-19 tests to Medicare beneficiaries in exchange for personal details, including Medicare information. However, the services are unapproved and illegitimate. Fraudsters are targeting beneficiaries in a number of ways, including telemarketing calls, social media platforms, and door-to-door visits.

These scammers use the coronavirus pandemic to benefit themselves, and beneficiaries face potential harms. The personal information collected can be used to fraudulently bill Federal health care programs and commit medical identity theft. If Medicare or Medicaid denies the claim for an unapproved test, the beneficiary could be responsible for the cost.

The HHS OIG alert identifies five ways for members of the public to protect themselves: (1) beneficiaries should be cautious of unsolicited requests for their Medicare or Medicaid numbers; (2) be suspicious of any unexpected calls or visitors offering COVID-19 tests or supplies. If your personal information is compromised, it may be used in other fraud schemes; (3) ignore offers or advertisements for COVID-19 testing or treatments on social media sites; (4) a physician or other trusted health care provider should assess your condition and approve any requests for COVID-19 testing; and (5) If you suspect COVID-19 fraud, contact National Center for Disaster Fraud Hotline (866) 720-5721 or [email protected].

Here is a direct link to the HHS-OIG public alert: https://oig.hhs.gov/coronavirus/index.asp?utm_source=web&utm_medium=web&utm_#.XnkeKV2IgDo.linkedin

It has been estimated that fraudulent insurance and benefit claims cost the U.S. health care system hundreds of billions of dollars per year. It is disappointing but unfortunately not surprising that fraudsters would attempt to profit off the current health care crisis. What remains to be seen is whether and to what extent they get away with it.  Stay tuned.

Seyfarth Synopsis: Several deadlines established by the IRS to adopt amendments or restatements to employer-sponsored retirement plans, and in this instance specifically, to 403(b) plans maintained by tax-exempt entities and pre-approved defined benefit pension plans maintained by any employer, were fast approaching. On March 27, the IRS extended these upcoming deadlines giving employers who sponsor these plans additional time to adopt necessary amendments to, or restatements of, 403(b) plans and defined benefit pension plans. This gives impacted employers much needed breathing room in a point in time where employer-resources are being focused on COVID-19 issues. These extensions were widely expected, but at least in the case of the deadline applicable to 403(b) plans, the IRS waited until just four days before the deadline to let us know.

Pre-Approved Defined Benefit Pension Plans

Several years back, in order to control the flow of determination letter applications that were being sent to the IRS, the IRS established fixed remedial amendment cycles during which plans could be amended or restated to address recent legislation or regulatory guidance. The six-year remedial amendment cycle applicable to pre-approved defined benefit pension plans was scheduled to end on April 30, 2020. Late yesterday, the IRS announced that this deadline was being extended three months to July 31, 2020. Thus, if an employer adopts a defined benefit pension plan that the IRS “pre-approved” based on the 2012 Cumulative List of required amendments no later than July 31, 2020, the IRS will consider the plan timely amended. Employers eligible to submit an application for a favorable determination letter also have until July 31, 2020 to submit that application.

Note: While not an immediate concern, the start of the next remedial amendment cycle for pre-approved defined benefit pension plans also will be delayed to August 1, 2020, but will still end as previously scheduled on January 31, 2025.

403(b) Plans Sponsored by Tax-Exempt Employers

Of even more immediate impact, the IRS also granted a three month extension of the remedial amendment period applicable to 403(b) plans that was due to close on March 31, 2020. The deadline for making these amendments to or restatements of 403(b) plans, or the adoption of an IRS pre-approved 403(b) plan document is now June 30, 2020.

The upcoming end of this particular remedial amendment period was of great interest to tax-exempt employers who sponsored 403(b) plans (a 401(k)-like tax-preferred retirement plan available only to tax-exempt and governmental employers akin to a 401(k) plan).  Under this remedial amendment period, tax-exempt and governmental employers had the opportunity to amend or restate their 403(b) plans retroactive to January 1, 2010 (the date that having a written 403(b) plan document was finally effective pursuant to regulations issued by the IRS in 2007).  This means that a 403(b) plan sponsor has the ability to fix “document failures” (the failure of a 403(b) plan document to include a Code- or regulatory-required provision) retroactive to 2010.

Note: This ability to retroactively fix a 403(b) document failure did not extend to “operational failures” – a failure to have followed a provision of the plan document, or a required rule that was not properly included in the plan document.  For these operational failures, 403(b) plan sponsors would need to look to the IRS voluntary correction program.

As such, this particular remedial amendment period was a significant issue for sponsors of 403(b) plans.

For certain, impacted employers and employee benefit practitioners welcome the extension of these upcoming deadlines.  Note that the failure to timely adopt amendments to or restatements of defined benefit pension plans or 403(b) plans by the now-extended deadlines outlined above, does not preclude the plan sponsor from fixing a plan document failure that is not addressed until after the applicable deadline. In those cases, the plan sponsors would need to apply to the IRS voluntary correction program for an individual Compliance Statement, a process that can take time and will incur costs that are not necessary if the deadlines are adhered to.

Additional information and details of these extension will be provided by the IRS in future guidance. Of course, we are happy to help if you need any assistance in this regard.

Stay safe.

Seyfarth Synopsis: On March 27, 2020, the House of Representatives followed the Senate’s lead in voting overwhelmingly to pass the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The President signed the legislation into law shortly thereafter. This blog post highlights the health and welfare benefit provisions contained in the law. Click here to review the executive compensation provision contained in the law, and click here and here to review the retirement plan provisions.

No Cost Coverage for COVID-19 Screenings and Vaccines

Screenings and Related Costs at No Charge to Participants

The CARES Act amended (and expanded) the screening mandate under the Families First Coronavirus Response Act (FFCRA). As a refresher, the FFCRA requires insured and self-funded group health plans to provide coverage for COVID-19 screenings, as well as any items and services furnished during the office visit (including telehealth visit), urgent care center visit, and emergency room visit that results in an order for or administration of a COVID-19 screening. Plans may not impose any cost-sharing (deductibles, copays, coinsurance, etc.) for such screening or associated visit.

The CARES Act amends the FFCRA to clarify that plans must also cover such services in the non-network setting at the rate of reimbursement publicized by the provider on its website (the Act requires providers to do so), or a lower rate negotiated with the provider. Presumably, the intent of this provision is to ensure the plan pays a sufficient rate for non-network coverage to avoid participant balance billing, while limiting the plan’s upside liability through the internet price publishing obligation.

To be clear, neither the FFCRA nor the CARES Act mandate that plans cover (with or without cost-sharing) coronavirus-related services following a COVID-19 diagnosis.

Vaccine at No Charge to Participants

The CARES Act further sets the stage to require plans to cover COVID-19 vaccinations at no cost (once available). As most are aware, the ACA requires that preventive services must be provided at no cost. For these purposes, preventive services include recommendations by the US Preventive Services Task Force no earlier than the first plan year beginning one year after the recommendation is added. The CARES Act creates a special rule for COVID-19 vaccines, requiring coverage within 15 days of the date the recommendation is released.

Permits Free Telehealth with no Impact on HDHPs through 2021

The CARES Act also strikes new ground in allowing telehealth services to be covered under a High Deductible Health Plan (HDHP) before the deductible is met, thus not impacting coverage for Health Savings Accounts (HSAs). This is temporary relief, however, and only allows for the first dollar coverage of such telehealth services for plan years beginning before 2022. To be clear, neither the FFCRA nor the CARES Act mandates no-cost telehealth coverage (except for COVID-19-related screening), but it does permit such no-cost coverage for participants in an HDHP.

Tax-Free Coverage for OTC Products

The CARES Act repeals the long-loathed ACA prohibition on reimbursement for over-the-counter drugs from HSAs, health FSAs, HRAs and Archer MSAs. In addition, it expands the scope of these reimbursement vehicles to permit tax-free reimbursement for menstrual care products, with all provisions taking effect as of January 1, 2020.

Privacy Clarifications

The CARES Act more closely conforms the federal law governing the confidentiality and sharing of substance use disorder (SUD) treatment records, implemented at 42 C.F.R. Part 2 (Part 2), with the Health Insurance Portability and Accountability Act (HIPAA). Because Part 2 imposed stricter requirements on the use and disclosure of Part 2 records than HIPAA, this alignment has been long advocated for by various stakeholders in the health care sector. These changes should simplify the process of sharing Part 2 SUD records between Part 2 programs, group health plans and their business associates for treatment, payment and health care operations. The new rules are effective for uses and disclosure of Part 2 records 12 months after the date of enactment of the CARES Act, with the Secretary of Health and Human Services directed to issue implementing regulations in the interim.

Student Loan Repayment Benefit through 2020

The CARES Act allows employers to contribute up to $5,250 toward an employee’s qualifying student loans. The employer’s student loan payments may be made directly to the lender or via reimbursement to the employee, and are excludable from the employee’s income up to the $5,250 cap for all employer-provided educational assistance benefits during 2020. Previously, employers could only provide assistance for ongoing tuition payments but could not provide assistance for previously incurred loans on a tax-preferred basis. This is another temporary provision, only applying to an employer’s student loan payments after the date of enactment of the CARES Act through December 31, 2020.