Last Minute Relief: Interpretation of Delay Adds Lots of Work & Additional Exposure


Originally announced jointly by the IRS and DOL in March of 2020, (the “delay rule”), many deadlines applicable to ERSISA claims, COBRA, and other time frames were delayed until the end of the outbreak period.   Although it did not seem all that important at the time, the statutory authority under which the delay rule was issued provided a maximum duration of one year.   Looking back, it is fair to say that people were generally not concerned about how to eventually transition out of the delay rule.  Rather, efforts focused upon how to manage the time frame delays and the related issues associated with the time frame delays.

Wherever a person was in a time period with a deadline, time stopped running; the time frame (or remainder of the time frame) was suspended until the delay rule ended.  At the end of the delay rule, suspension of the time frame would end.  It was generally thought that all of the interrupted time frames would resume running as of the end date of the delay rule, March 1, 2021.  In other words, individuals that had time frames stopped during the period beginning March 1, 2020 through February 28, 2020 would all have their interrupted time frames resume running as of March 1, 2021.  For example, if Jamie had a qualifying event on June 30, 2020, and the employer sent the notice of COBRA election rights to Jamie on July 15, 2020, Jamie had 60 days to elect COBRA running from July 15, 2020.  Because of the delay rule, the 60 day period to elect COBRA never started to run, it was interrupted.  Although there was no agency position stated, the general expectation was that when the delay rule ended and time started to run again, Jamie would have the 60 day election period to elect COBRA begin to run on March 1, 2021.  And, that 60 days after the resumption of time running, Jamie’s COBRA election period would be over.  Jamie would either be covered under COBRA or not covered under COBRA, and things would move normally from that point forward.  Under this approach, all interrupted time frames would be back running on March 1, 2021.

As time continued, efforts largely continued focusing on the unique and perhaps unexpected problems the delays were causing, such as stop loss carrier contracts, changing carriers, moving from self-insured to fully insured, retroactive changes to coverage in excess of 60 or 90 days, determining account balances for carryover and grace periods, running of Special Enrollment periods, determining HSA contribution eligibity, etc.  But as time went on, and the pandemic remained at the forefront, thoughts began to turn to the transition following the end of the delay rule.  And it became clear that the end of the one year statutory authority for the delay rule would occur before the end of the outbreak period.  As the new year began, January ended, and the national day of love passed by, many began to worry.  Whether you crossed your fingers, held your breath, or experienced acid reflux, guidance was needed.  But deep down, people were confident that some reasonable resolution in the form of relief would be issued.  And there was an assumption that the relief would reasonably address the difficulties that had manifested to date during the period of delay and take into account the difficulties that would be caused by the transition out of the delay.  Am I right?

But for many, today’s announcement on the last business day before its effective date, is not the welcomed guidance for which we hoped.  Under the terms of today’s announcement, the “delay” does not end because March 1, 2021 is one year from the date of the delay rule’s issuance.  Rather, the “delay” referred to in the delay rule issued last March 2020 is to be applied on an individual by individual basis.

Instead of resuming all of the time frames that were delayed at some point during the one year period following the issuance of the original delay order (i.e., as of March 1, 2021), each individual will need to have his or her one year period under the original delay rule measured from the date on which time stopped running.  Let’s return to Jamie.  Instead of having the 60 day COBRA election period begin to run on March 1, 2021, Jamie has the one year period under the original delay rule measured from July 15, 2020, the date Jamie’s 60 day COBRA election period would have started but for the delay rule.  Jamie will have his 60 day COBRA election period begin running on July 15, 2021.  Under the announcement released today, the measurement date must be identified and then the end date of the original delay rule must be calculated and applied.  To put this in perspective, there could be as many resumption dates as there are individuals time frames that were delayed.

However, all is not lost.  In today’s announcement, the DOL acknowledges that “there may be instances when full and timely compliance . . . may not be possible.”  And to address those types of situations, good faith and reasonable diligence will be considered in DOL enforcement.  Reading between the lines, document everything!

Might there be creative alternatives developed over the weekend?  Sure.  But keep in mind, any alternative should be fully vetted regarding key factors including the impact on ERISA and Code compliance, and contractual obligations under other plan related contracts (e.g., COBRA and claims service providers, stop loss carrier, PBM, etc.).  Unlike the delay rule itself, such creative alternatives are not required by law.

Have a nice weekend all.