The IRS and DOL published a joint rule in the Federal Register (pages 26351-26355) May 4, 2020, extending the timeframes employees have for electing COBRA and requesting special enrollment rights for health care plans.
The guidance also institutes a required extension to file claims for certain health plans sponsored by employers subject to ERISA. The claim filing extension impacts Health Care Flexible Spending Accounts (HCFSAs), Limited Purpose Flexible Spending Accounts (LPFSAs) and Health Reimbursement Arrangements (HRAs).
Many HCFSAs, LPFSAs and HRAs provide plan participants a period of time known as the runout period after the Plan Year ends to submit claims for expenses that were incurred during the Plan Year. This is not additional time to spend the funds but rather to submit claims for expenses incurred during the Plan Year. The runout period chosen by employers typically ranges from 30 to 120 days.
For HCFSA, LPFSA and HRA plans with claim runout periods that end on or after March 1st, 2020, the notice requires certain employers to extend their runout period until 60 days after the National COVID-19 Emergency is declared over. The guidance is retro-active to March 1, 2020.
FSA Plan Year 1/1/19 – 12/31/19 with a 4/29/20 (120 day) runout period – Rule will apply
FSA Plan Year 4/1/19 – 3/31/20 with a 5/30/20 (60 day) runout period – Rule will apply
FSA Plan Year 1/1/19 – 12/31/19 with a 2/29/20 (60 day) runout period – Rule will not apply
Employers who are not subject to ERISA (Church Plans (those who have not ‘opted’ into ERISA), Public School Districts, Government employers, etc.) may follow their plans standard claim runout period. However, the Federal Government is encouraging those employers to follow the new claims filing extension.
At this point it is uncertain when the National COVID-19 Emergency will be declared over. However, to illustrate the impact of the claim extension, below is an example.
- HCFSA Plan Year: 4/1/19 – 3/31/20 with a 60 day claim runout period (to 5/30/2020)
- New Guidance: Participants may file claims for the 4/1/19 – 3/31/20 Plan Year for 60 days beyond the formal end of the National COVID-19 Emergency
- If the National COVID-19 Emergency is declared over on 6/30/20, participants can file claims up to 8/29/20 for expenses incurred during the Plan Year
DBS is currently working on our administrative process to accommodate this new provision. While the new rule extends the claim runout periods beyond what employers may have originally elected for their plans, the practical impact is small as most participants file their claims within 90 days.
As a reminder, the claim filing extension rule applies during the COVID-19 National Emergency and is required for plans subject to ERISA. If your plan is not subject to ERISA, the extension is suggested but not required. Please consult your legal counsel to see if your HCFSA, LPFSA, and/or HRA is subject to ERISA.
DBS will send out additional updates as warranted. This notice is not to be construed as legal advice. Please contact us at (800) 234-1229 if you have questions. Your business is greatly appreciated.