IRS and EBSA Extend COBRA, HIPAA and Other Plan Time Frames for Katrina Victims

IRS and EBSA (the Department of Labor agency in charge of COBRA) issued a joint notice this week relating to the extension of timeframes for benefit plans and participants affected by Hurricane Katrina. Many deadlines related to COBRA, HIPAA, and group health plan claims and appeals do not apply during the period from August 29, 2005 through January 3, 2006. In effect, this period basically ceases to exist for calculating the time frames indicated in the Notice.

Infinisource currently has the system and resources to comply fully with the time frame extension requirements for its clients. We are finalizing processes to ensure continued compliance. We encourage clients to contact Infinisource directly at 866-320-3040 to confirm that they are “directly affected by Hurricane Katrina” (further defined below), and to update us on any participant or employer contact address changes of which they become aware. Please contact us regarding any special issues that arise related to the services we provide.

The guidance applies only to those who are “directly affected by Hurricane Katrina”, whether they be employee benefit plans or participants (including qualified beneficiaries, other beneficiaries, and claimants). To determine whether this guidance applies, employers should conduct a three-step analysis.

Step One: Review the County/Parish List

First, review the list of counties and parishes that were designated as disaster areas eligible for Individual Assistance. The disaster area consists of 31 Louisiana parishes, and 47 Mississippi and seven Alabama counties:

• Louisiana (FEMA-1603-DR): Acadia, Ascension, Assumption, Calcasieu, Cameron, East Baton Rouge, East Feliciana, Iberia, Iberville, Jefferson, Jefferson Davis, Lafayette, Lafourche, Livingston, Orleans, Pointe Coupee, Plaquemines, St. Bernard, St. Charles, St. Helena, St. James, St. John, St. Mary, St. Martin, St. Tammany, Tangipahoa, Terrebonne, Vermilion, Washington, West Baton Rouge, and West Feliciana.
• Mississippi (FEMA-1604-DR): Adams, Amite, Attala, Claiborne, Choctaw, Clarke, Copiah, Covington, Forrest, Franklin, George, Greene, Hancock, Harrison, Hinds, Jackson, Jasper, Jefferson, Jefferson Davis, Jones, Kemper, Lamar, Lauderdale, Lawrence, Leake, Lincoln, Lowndes, Madison, Marion, Neshoba, Newton, Noxubee, Oktibbeha, Pearl River, Perry, Pike, Rankin, Scott, Simpson, Smith, Stone, Walthall, Warren, Wayne, Wilkinson, Winston, and Yazoo.
• Alabama (FEMA-1605-DR): Baldwin, Mobile, Pickens, Greene, Hale, Tuscaloosa, and Washington.

Please note that no Florida counties are currently eligible for this time frame extension.

Step Two: Determine if the Plan is Affected

Second, determine if the employee benefit plan meets one of the following criteria for being directly affected by Hurricane Katrina:

• The employer’s principal place of business is in the disaster area; or
• The employer’s place of business where more than 50 percent of active plan participants work is in the disaster area; or
• The location of the plan or the plan administrator is in the disaster area; or
• The location of the primary plan recordkeeper (e.g., a third party administrator or carrier) was in the disaster area.

Step Three: Determine if Participants, etc. are Affected

Third, determine if one or more participants reside or work in the disaster area or receive coverage under an employer benefit plan that is directly affected.

Thus, the time frame extension is available to participants who live in another state but receive benefits from a plan that was directly affected by Hurricane Katrina. Similarly, the extension is available to participants who live or work in the disaster area but receive benefits from an employer benefit plan that was not directly affected by Hurricane Katrina.

Participant Time Frame Extensions

The following time frames are extended for participants who are directly affected by Hurricane Katrina:

• The 63-day break-in-coverage period for determining creditable coverage under HIPAA pre-existing condition exclusion rules;
• The 30-day period during which a participant may add children who are newborn, adopted or placed for adoption;
• The 30-day special enrollment period during which a participant may add a spouse or dependent;
• The 60-day COBRA initial election period;
• The 45-day initial payment period and 30-day payment grace period under COBRA;
• The 60-day notice period for qualified beneficiaries to notify the employer of a qualifying event or disability determination under COBRA;
• The date for filing a claim under the plan’s claims procedure; and
• The date, typically 180 days, for appealing an adverse benefit determination on a claim.

Plan Time Frame Extensions

The following time frames are extended for employer benefit plans that are directly affected by Hurricane Katrina:

• The date for providing a Certificate of Creditable Coverage under HIPAA; and
• The date for sending a COBRA Election Notice after the occurrence of a qualifying event.

IRS and EBSA included several examples on how this extension will work. For example, a COBRA participant fails to pay monthly premiums for August through December. The August payment would be timely if paid by January 6, 2006; the September through January premiums would be timely if paid by February 2, 2006 (30 days after January 3, 2006).

A HIPAA example is as follows: an employee who lost coverage on Aug. 14, 2005 due to termination of employment would not have a 63-day break in coverage until February 21, 2006 because the first 14 days would count, then the last 49 days would not be tolled until after January 3, 2006. Note that the prior employer would not change the content of the Certificate of Creditable Coverage; it would be incumbent on the subsequent employer to ignore the period of August 29, 2005 – January 3, 2006 for purposes of determining the 63-day break in coverage.

Issues Not Addressed by This Guidance

This guidance does not address several other issues that may impact employers related to Hurricane Katrina. First, it does not address Form 5500 filing deadlines. These deadlines have now been extended to January 3, 2006, in accordance with a September 20, 2005 EBSA News Release (www.dol.gov/ebsa/newsroom/pr0920a05.html). Please note that there are more affected counties than listed in the time frame extension guidance, including 11 Florida counties.

Second, the guidance does not provide employer extensions for other COBRA-required notices, like the General, Unavailability and Termination Notices. Third, the guidance does not require amendments to the Plan Document or Summary Plan Description nor does it affirmatively obligate employers to notify affected participants, etc. However, prudent employers should take affirmative steps to communicate to avoid future problems. Fourth, the guidance does not specifically impact FSA/DCAP grace periods, FSA/DCAP run-out periods or open enrollment periods.

Finally, the guidance fails to address mid-year election change rules related to cafeteria plans and FSA/DCAP/HRA claim substantiation requirements. During emergency and disaster circumstances, IRS will typically examine a plan administrator’s good faith attempts to adjudicate claims and administer election changes appropriately. For example, a participant who cannot substantiate a claim could likely provide an affidavit certifying that all reasonable efforts to document a claim have failed. Infinisource is developing such an affidavit for use by its flexible benefit clients and their participants.

Additional Information

Infinisource will provide its COBRA, HIPAA and Flexible Benefit (HRA, Health and Dependent Care FSA) clients with more detailed information in the near future on how these time frame extensions will be administered.

The IRS-EBSA guidance is available at: www.dol.gov/ebsa/regs/fedreg/final/2005018901.pdf.

###

News Room sign-up sheet | Archive