COVID-19 and Mid-Year Plan Amendments – Employer Compliance Checklist

By Anne E. Hensley and Stacey Stewart

The COVID-19 pandemic has made an enormous impact to employer sponsored group health plans. In response to the pandemic challenges faced by employers and employees, the government enacted significant COVID-19-related legislation and issued numerous pieces of guidance relating to employee benefit plans in hopes to bring some form of relief to employers and flexibility to employees. From the Families First Coronavirus Act (FFCRA) to the Coronavirus Aid, Relief and Economic Security Act (CARES) and all of the regulatory guidance in between, employee benefit plan compliance looks much differently than it did at the beginning of 2020.

Most often, changes to benefit plans are effective at the beginning of the plan year and communicated during open enrollment. But enter 2020, the pandemic, and an onslaught of mandatory and permissive COVID-19 health plan guidance. How should employers approach health plan changes that occur outside of open enrollment?

Below is a checklist of general steps required for mid-plan year amendments to plans subject to the Employee Retirement Income Security Act of 1974 (ERISA) and the Affordable Care Act (ACA) for COVID-19 related plan changes.

  • Amend Plan Document: Amending a plan requires formal written action (i.e., a plan amendment). Plan sponsors must be sure to follow established plan procedures as outlined in the plan document and should reach out to applicable plan document provider(s) (Administrative Services Only Provider (ASO)/Third Party Administrator (TPA or the employer’s legal counsel) for assistance in preparing the amendment and Summary Plan Description/ Summary of Material Modifications discussed below. With COVID-19 related changes, employers should strive to amend plans prospectively at best and as soon as reasonably feasible at worst.
  • Provide Updated Summary Plan Description (SPD) or Summary of Material Modifications (SMM):  If an employer makes a material change to a group health plan, ERISA generally requires notifying participants and beneficiaries of the change. This is accomplished by providing an updated SPD or SMM within 210 days after the end of the plan year in which the change is adopted. If the change is a material reduction in benefits or services under a group health plan, then must provide notice within 60 days after the date the change is adopted.
  • Provide ACA-Required Notice of Material Modifications: The ACA requires advance notice when an employer makes a material change to a group health plan mid- plan year that would affect the content of the most recently provided Summary of Benefits and Coverage (SBC). Not all changes will affect the content of the SBC and trigger this rule. The DOL has indicated it will not seek to enforce this rule for certain other changes, such as plan design changes that provide greater coverage relating to the diagnosis and/or treatment of COVID-19, or that add benefits, or reduce or eliminate cost-sharing, for telehealth and other remote care services. Instead, it requires notice be provided as soon as practicable
  • Consider and Address Impact on Grandfathered Status: Certain plan changes can impact the ability of a group health plan to maintain its status as grandfathered plan under the ACA (e.g., certain increases in cost sharing or decreases in employer contribution rate may cause a loss of grandfathered status). It is important to understand if a change will cause the plan to lose grandfathered status as that may mean other substantive changes are needed to bring the plan into compliance with the ACA requirements for non-grandfathered plans.
  • Consider and Address Impact on Cafeteria Plan/Enrollment Elections: If the change results in a significant increase or decrease in the cost of coverage, a significant coverage curtailment, or other qualifying event, then it may open up the ability for participants to make midyear election changes to their pre-tax elections under the cafeteria plan to add or drop coverage, change coverage options or the like. Other employer or employee action may also provide an election change opportunity under IRS cafeteria plan regulations.
  • Review Service/Vendor Agreements for and Make Any Necessary Changes: Plan changes can require adjustments to these agreements, such as TPA/ASO/stop-loss contracts or vendor agreements relating to specialty pharmacy. It is important that these changes are made in a timely fashion and that all parties are on the same page. For example, an employer does not want to make a change that the stop-loss carrier needs to approve but is not made aware of it and risk the employer losing the benefit of stop-loss.
  • Confirm or Revise Content of Other Plan or Employer Items for Consistency and Notify All Affected Parties: Plan changes may affect the content of other items such as the employee handbook and internal HR procedures.  These items should be consistent to ensure the plan is administered correctly and participants do not receive conflicting information. Employers should revise their leave policies, employee handbook, internal HR procedures etc. as needed to ensure consistency. All affected parties need to be made aware of plan changes and that can include the employer’s own internal departments, such as payroll, IT etc.
  • Address Other Considerations Raised Based on Employer Characteristics: Certain employers, such as those with union employees and those who are government contractors, may have additional compliance considerations and obligations. For example, an employer with union employees will need to ensure the collective bargaining agreement permits the intended change and may need to discuss matters with applicable union representation. Government contractors, on the other hand, need to consider how the changes may impact their compliance with the Service Contract Act. 

The above is a list of initial considerations-certainly other items might be required depending on the plan particulars, participant population and demographics (e.g., fully insured plans need to check state and local law requirements).

Anne E. Hensley, JD, ARM
Senior Vice President & Practice Leader
ERISA & Employee Benefit Compliance
[email protected]
www.McGriffInsurance.com

Stacey Stewart, JD
Senior Employee Benefits Compliance Officer
[email protected]
www.McGriffInsurance.com