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Employee Benefits Security Administration

EBSA Final Rule

Extension of Certain Time Frames for Employee Benefit Plans Affected by Hurricane Katrina [09/21/2005]

[PDF Version]

Volume 70, Number 182, Page 55499-55502


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Part V





Department of Labor





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Employee Benefits Security Administration



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29 CFR Parts 2560 and 2590





Department of the Treasury





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Internal Revenue Service



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26 CFR Part 54



Extension of Certain Time Frames for Employee Benefit Plans Affected by 
Hurricane Katrina; Final Rule


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DEPARTMENT OF LABOR

Employee Benefits Security Administration

29 CFR Parts 2560 and 2590

DEPARTMENT OF THE TREASURY

Internal Revenue Service

26 CFR Part 54

 
Extension of Certain Time Frames for Employee Benefit Plans 
Affected by Hurricane Katrina

AGENCIES: Employee Benefits Security Administration, Department of 
Labor; Internal Revenue Service, Department of the Treasury.

ACTION: Extension of time frames.

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SUMMARY: This document announces the extension of certain time frames 
under the Employee Retirement Income Security Act and Internal Revenue 
Code for group health plans, disability and other welfare plans, 
pension plans, participants and beneficiaries of these plans, and group 
health insurance issuers directly affected by Hurricane Katrina.

EFFECTIVE DATES: September 21, 2005.

FOR FURTHER INFORMATION CONTACT: Amy Turner, Employee Benefits Security 
Administration, Department of Labor, at 202-693-8335; or Russ 
Weinheimer, Internal Revenue Service, Department of the Treasury, at 
202-622-6080.

SUPPLEMENTARY INFORMATION:

I. Purpose

    As a result of Hurricane Katrina, a number of participants and 
beneficiaries covered by group health plans, disability or other 
welfare plans, and pension plans may encounter problems in exercising 
their health coverage portability or continuation coverage rights, or 
in filing or perfecting their benefit claims. Recognizing the numerous 
challenges already facing affected participants and beneficiaries, it 
is important that plans and the Agencies take steps to minimize the 
possibility of individuals losing benefits because of a failure to 
comply with certain pre-established time frames. Similarly, the 
Agencies recognize that affected plans also may have difficulty in 
complying with certain notice obligations related to a participant's 
health coverage portability or continuation coverage rights.
    Accordingly, under the authority of section 518 of the Employee 
Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. 1148, and 
section 7508A of the Internal Revenue Code of 1986 (Code), 26 U.S.C. 
7508A, the Agencies are extending certain time frames otherwise 
applicable to group health plans, disability and other welfare plans, 
pension plans, their participants and beneficiaries, and group health 
insurance issuers, under ERISA and the Code.\1\
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    \1\ ERISA section 518 and Code section 7508A generally provide 
that, in the case of an employee benefit plan, sponsor, 
administrator, participant, beneficiary, or other person with 
respect to such a plan, affected by a Presidentially declared 
disaster, notwithstanding any other provision of law, the 
Secretaries of Labor and the Treasury may prescribe (by notice or 
otherwise) a period of up to one year that may be disregarded in 
determining the date by which any action is required or permitted to 
be completed. Section 518 of ERISA and section 7508A of the Code 
further provide that no plan shall be treated as failing to be 
operated in accordance with the terms of the plan solely as a result 
of complying with the postponement of a deadline under those 
sections.
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    The Agencies believe that such relief is immediately needed to 
preserve and protect the benefits of participants and beneficiaries in 
affected plans. Accordingly, the Agencies have determined, pursuant to 
section 553 of the Administrative Procedure Act, 5 U.S.C. 553(b) and 
(d), that there is good cause for making the relief provided by this 
notice effective immediately upon publication and that notice and 
public participation may result in undue delay and, therefore, be 
contrary to public interest.
    The relief provided by this Notice supplements other Hurricane 
Katrina disaster relief, which can be accessed on the Internet at 
http://www.dol.gov and http://www.irs.gov.

II. Background

    Title I of the Health Insurance Portability and Accountability Act 
of 1996 (HIPAA) provides portability of group health coverage by, among 
other things, placing limitations on the ability of a group health plan 
or group health insurance issuer to impose a preexisting condition 
exclusion and by requiring special enrollment rights. ERISA section 701 
and Code section 9801. Title X of the Consolidated Omnibus Budget 
Reconciliation Act of 1985 (COBRA) permits qualified beneficiaries who 
lose coverage under a group health plan to elect continuation health 
coverage. ERISA section 601 and Code section 4980B. Section 503 of 
ERISA and the Department of Labor's claims procedure regulation at 29 
CFR 2560.503-1 require employee benefit plans subject to Title I of 
ERISA to establish and maintain reasonable procedures governing the 
determination and appeal of claims for benefits under the plan. All of 
the foregoing provisions include timing requirements for certain acts 
in connection with employee benefit plans, some of which are being 
modified by this notice.

A. HIPAA Time Frames

    The HIPAA portability provisions generally provide that a group 
health plan or group health insurance issuer may disregard a period of 
creditable coverage if there is a subsequent 63-day break in coverage. 
ERISA section 701(c)(2)(A) and Code section 9801(c)(2)(A). Also, a 
newborn, adopted child, or child placed for adoption may not be subject 
to a preexisting condition exclusion period if covered under creditable 
coverage within 30 days of birth, adoption, or placement for adoption. 
ERISA section 701(d) and Code section 9801(d).
    The HIPAA special enrollment provisions generally provide that 
employees must request enrollment within 30 days of a special 
enrollment trigger (including loss of eligibility of coverage or loss 
of employer contributions) to be eligible for special enrollment. ERISA 
section 701(f) and Code section 9801(f).
    The HIPAA certification rules prescribe time periods for the 
provision of certificates of creditable coverage upon loss of coverage. 
Under the regulations, plans and issuers subject to the COBRA 
continuation coverage provisions are required to provide an automatic 
certificate no later than the time for providing a COBRA election 
notice. Plans and issuers not subject to COBRA are required to provide 
the automatic certificate within a reasonable time after coverage 
ceases. 29 CFR 2590.701-5(a)(2)(ii) and 26 CFR 54.9801-5(a)(2)(ii).

B. COBRA Time Frames

    The COBRA continuation coverage provisions generally provide a 
qualified beneficiary a period of at least 60 days to elect COBRA 
continuation coverage under a group health plan. ERISA section 605 and 
Code section 4980B(f)(5).
    Plans are required to allow payers to pay premiums in monthly 
installments and plans cannot require payment of premiums before 45 
days after the day of the initial COBRA election. ERISA section 602(3) 
and Code section 4980B(f)(2)(C). Under the COBRA rules, a premium is 
considered paid timely if it is made not later than 30 days after the 
first day in the period for which payment is being made. ERISA section 
602(2)(C) and Code section 4980B(f)(2)(B)(iii), 26 CFR 54.4980B-8 Q&A-
5(a).

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    Notice provisions prescribe time periods for individuals to notify 
the plan of a qualifying event or determination of disability and for 
plans to notify qualified beneficiaries of their rights to elect COBRA 
continuation coverage. ERISA section 606 and Code section 4980B(f)(6), 
29 CFR 2590.606-3.

C. Claims Procedure Time Frames

    Section 503 of ERISA and the Department of Labor's claims procedure 
regulation at 29 CFR 2560.503-1 require employee benefit plans to 
establish and maintain a procedure governing the filing and initial 
disposition of benefit claims, and provide claimants with a reasonable 
opportunity to appeal an adverse benefit determination to an 
appropriate named fiduciary. Under the regulation, plans cannot have 
provisions that unduly inhibit or hamper the initiation or processing 
of claims for benefits. Further, group health plans and disability 
plans must provide claimants at least 180 days following receipt of an 
adverse benefit determination to appeal (60 days in the case of pension 
plans and other welfare benefit plans).

III. Relief

A. Relief for Affected Plan Participants, Beneficiaries, Qualified 
Beneficiaries, and Claimants

    With respect to plan participants, beneficiaries, qualified 
beneficiaries, or claimants directly affected by Hurricane Katrina (as 
defined in paragraph III.C.(1)), group health plans, disability and 
other welfare plans, pension plans, and health insurance issuers 
subject to part 7 of ERISA, must disregard the period from August 29, 
2005 through January 3, 2006 when determining any of the following time 
periods and dates--
    (1) The 63-day break in coverage period under ERISA section 
701(c)(2)(A) and Code section 9801(c)(2)(A),
    (2) The 30-day period to secure creditable coverage without a 
preexisting condition exclusion for certain children under ERISA 
section 701(d) and Code section 9801(d),
    (3) The 30-day period to request special enrollment under ERISA 
section 701(f) and Code section 9801(f),
    (4) The 60-day period to elect COBRA continuation coverage under 
ERISA section 605 and Code section 4980B(f)(5),
    (5) The date for making COBRA premium payments pursuant to ERISA 
section 602(2)(C) and (3) and Code section 4980B(f)(2)(B)(iii) and (C),
    (6) The date for individuals to notify the plan of a qualifying 
event or determination of disability under ERISA section 606(a)(3) and 
Code section 4980B(f)(6),
    (7) The date within which individuals may file a benefit claim 
under the plan's claims procedure pursuant to 29 CFR 2560.503-1, and
    (8) The date within which claimants may file an appeal of an 
adverse benefit determination under the plan's claims procedure 
pursuant to 29 CFR 2560.503-1(h).

B. Relief for Group Health Plans

    With respect to group health plans, their sponsors and 
administrators, and health insurance issuers subject to part 7 of 
ERISA, that are directly affected by Hurricane Katrina (as defined in 
paragraph III.C.(3)), the period from August 29, 2005 through January 
3, 2006 shall be disregarded when determining the following dates--
    (1) The date for providing an automatic certificate of creditable 
coverage under 29 CFR 2590.701-5(a)(2)(ii) and 26 CFR 54.9801-
5(a)(2)(ii), and
    (2) The date for providing a COBRA election notice under ERISA 
section 606 and Code section Code section 4980B(f)(6).

C. Definitions

    For purposes of this notice--
    (1) A participant, beneficiary, qualified beneficiary, or claimant 
directly affected by Hurricane Katrina means an individual who resided, 
lived, or worked in one of the disaster areas (as defined in paragraph 
III.C.(2)) at the time of the hurricane; or if the employee benefit 
plan providing the individual's coverage was directly affected (as 
defined in paragraph III.C.(3)).
    (2) The term disaster areas means the counties and parishes in 
Louisiana, Mississippi or Alabama that have been or are later 
designated as disaster areas eligible for Individual Assistance by the 
Federal Emergency Management Agency because of the devastation caused 
by Hurricane Katrina.
    (3) An employee benefit plan is directly affected by Hurricane 
Katrina if the principal place of business of the employer that 
maintains the plan (in the case of a single-employer plan, determined 
disregarding the rules of section 414(b) and (c) of the Code); the 
principal place of business of employers that employ more than 50 
percent of the active participants covered by the plan (in the case of 
a plan covering employees of more than one employer, determined 
disregarding the rules of section 414(b) and (c) of the Code); the 
office of the plan or the plan administrator; or the office of the 
primary recordkeeper serving the plan, was located in one of disaster 
areas (as defined in paragraph III.C.(2)) at the time of the hurricane.
    D. Any later extension of the January 3, 2006 date by the Agencies 
will automatically apply for purposes of the deadlines addressed by 
this notice.

IV. Examples

    The following examples illustrate the time frame for extensions 
required by this notice. In each example, assume that the individual 
described is directly affected by the hurricane.

    Example 1. (i) Facts. Individual A works for Employer X and 
participates in X's group health plan. On August 29, 2005, the day 
of Hurricane Katrina, X's business is destroyed and the plan ceases 
to function. A has no other creditable coverage.
    (ii) Conclusion. In this Example 1, when determining A's 63-day 
break in coverage period and special enrollment period, the period 
from August 29, 2005 through January 3, 2006 is disregarded. 
Accordingly, A would not incur a 63-day break in coverage until 63 
days after January 3 (which is March 7, 2006) and the last day of 
any special enrollment period is 30 days after January 3 (which is 
February 2, 2006).
    Example 2. (i) Facts. Same facts as Example 1 and another 
employer that is part of the same controlled group as X continues to 
operate and sponsor a group health plan. A is provided a COBRA 
election notice on October 2, 2005.
    (ii) Conclusion. In this Example 2, the period from October 2, 
2005 through January 3, 2006 is disregarded for purposes of 
determining A's COBRA election period. The last day of A's COBRA 
election period is 60 days after January 3, 2006 (which is March 4, 
2006).
    Example 3. (i) Facts. Individual B participated in a group 
health plan and lost eligibility for coverage on August 14, 2005.
    (ii) Conclusion. In this Example 3, B had been without coverage 
for 14 days before the day of the hurricane. When determining B's 
63-day break in coverage period and special enrollment period, the 
period from August 29, 2005 through January 3, 2006 is disregarded. 
The last day of B's 63-day break in coverage period is 49 days after 
January 3 (which is February 21, 2006) and the last day of any 
special enrollment period is 16 days after January 3, 2006 (which is 
January 19, 2006).
    Example 4. (i) Facts. Before the hurricane, Individual C was 
receiving COBRA continuation coverage under a group health plan. 
More than 45 days had passed since C had elected COBRA. Monthly 
premium payments were due by the first of the month. The plan does 
not permit qualified beneficiaries longer than the statutory 30-day 
grace period for making premium payments. C made a timely August 
payment, but not a September payment, before the hurricane.
    (ii) Conclusion. In this Example 4, the period from August 29, 
2005 through January 3, 2006 is disregarded for purposes of making 
monthly COBRA premium installment

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payments. Premium payments made by 30 days after January 3, 2006 
(which is February 2, 2006) for September, October, November, 
December and January are timely.
    Example 5. (i) Facts. Same facts as Example 4. By February 2, 
2006, a payment equal to two months' premium has been made for C.
    (ii) Conclusion. C is entitled to COBRA continuation coverage 
for September and October 2005.
    Example 6. (i) Facts. Individual D is a participant in a group 
health plan. On October 1, 2004, D received medical treatment for a 
condition covered under the plan, but a claim relating to the 
medical treatment was not yet submitted. Under the plan, claims must 
be submitted within 365 days of the participant's receipt of the 
medical treatment.
    (ii) Conclusion. For purposes of determining the 365-day period 
applicable to D's claim, the period from August 29, 2005 through 
January 3, 2006 is disregarded. Therefore, D's last day to submit a 
claim is 34 days after January 3, 2006, which is February 6, 2006.
    Example 7. (i) Facts. Individual E received a notification of an 
adverse benefit determination from his disability plan on August 10, 
2005. The notification advised E that there are 180 days within 
which to file an appeal.
    (ii) Conclusion. When determining the 180-day period within 
which P's appeal must be filed, the period from August 29, 2005 
through January 3, 2006 is disregarded. Therefore, E's last day to 
submit an appeal is 162 days after January 3, which is June 14, 
2006.

    Signed at Washington, DC, this 16th day of September, 2005.
Ann Combs,
Assistant Secretary, Employee Benefits Security Administration, 
Department of Labor.
    Signed this 16th day of September, 2005.
Mark E. Matthews,
Deputy Commissioner for Services and Enforcement, Internal Revenue 
Service, Department of the Treasury.
[FR Doc. 05-18901 Filed 9-19-05; 9:53 am]

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