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Day: May 6, 2020

By Nancy Abrams

On May 4, the Department of Labor and IRS jointly published a Rule entitled “Extension of Certain Timeframes for Employee Benefit Plans, Participants, and Beneficiaries Affected by the COVID-19 Outbreak.” The final rule extends most COBRA deadlines to beyond the “Outbreak Period,” which it defines as March 1, 2020, to 60 days after the end of the declared COVID-10 national emergency, or another date if provided by the agencies in future guidance (i.e., if the emergency declaration expires on June 29, 2020, the Outbreak Period will end on August 28, 2020).

The rule extends various COBRA deadlines as follows:

  • The COBRA election period. Under COBRA, employees and dependents who lose active coverage as a result of a qualifying event, such as termination of employment or reduction of hours, normally have 60 days to elect continuation coverage after receiving a COBRA election notice. Under the rule, the 60-day timeframe doesn’t start to run until the end of the Outbreak Period.
  • The COBRA premium payment period. COBRA enrollees normally have 45 days from their COBRA election to make the first premium payment, and subsequent monthly payments must be made within a 30-day grace period that starts at the beginning of each coverage month. Under the new rule, the initial premium payment and grace period don’t start to run until the end of the Outbreak Period.
  • The date for individuals to notify the plan of a qualifying event or determination of disability. Normally an individual has 60 days to inform a plan administrator of a qualifying event (i.e., a divorce or a child reaching the age of 26). Under the new rule, the 60 day period does not start to run until the end of the Outbreak Period.

Deadlines for individuals to file a benefit claim, to file an appeal of adverse benefit determination under the plan’s claims procedure, and to file a request for an external review after receipt of an adverse benefit determination were similarly extended.

Note, however, that no extension was granted for the 14-day deadline for plan administrators to furnish COBRA election notices after a qualifying event has occurred.

Under the new rule, employers must permit an employee or beneficiary to elect COBRA coverage even if more than 60 days has passed since the employee or beneficiary lost coverage under the employer’s health plan. In addition, an employer cannot terminate an employee’s COBRA coverage for failure to pay premiums during the “Outbreak Period,” which may result in the employer paying for the employee’s coverage.

If you have any questions, please contact Nancy Abrams at nabrams@sgrvlaw.com or (215) 241-8894.

 

 

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By Leslie Baskin

In my 35 years of being a bankruptcy practitioner, little did I think that I would ever quote Bette Davis from the movie, “All About Eve”, when she warns: “Fasten your seatbelts- you’re in for a bumpy ride”. Not only has the COVID-19 pandemic been unfathomable and the bumpiest of rides (and we do not even now know where it will take us), it has been devastating to our health and everyday well being. In fact, it is predicted to cost the world-wide economy at least $2.7 trillion. Realistically, we can expect to see a new wave of restructurings in the restaurant, hospitality, energy, manufacturing, transportation and the real estate industries. Further, this situation will affect relationships between landlords and tenants, lenders and borrowers and employers and employees. With “stay at home orders”, close of businesses, employees are losing jobs and filing unemployment claims at unprecedented rates.

The Coronavirus Aid, Relief and Economic Security Act of 2020 ( “CARES Act” ) signed into law on March 27, 2020, in conjunction with the Small Business Reorganization Act of 2019 (the “SBRA” ) which became effective a month prior, will act as a lifeline to small businesses and will also make bankruptcy options much more attractive for individuals. Together, the new legislation will streamline existing rules governing the efforts of small businesses to reorganize under Chapter 11 and individuals under Chapter 13.

For example, the CARES Act raises the maximum debt level limit of the new small business reorganization originally under SBRA to qualify from $2,725,625 to $7,500,000, allowing for increased access to the bankruptcy process (increase in debt limit expires on March 27,2020 unless it is extended by Congress). According to a recent study by the Brookings Institute, this expanded eligibility could help save an estimated seventy (70) percent of all businesses that might have to file for bankruptcy.

Further, the SBRA makes it easier for companies to retain their small businesses and makes it more difficult for creditors to contest Chapter 11 cases. Other critical provisions of the CARES Act provide that: a Plan must be filed by the debtor within ninety days of the bankruptcy; a Trustee will be appointed to assist in the proceeding; and a creditors committee will not be appointed ( critical to the saving of time and expense of the proceeding).

Individuals who are experiencing hard times due to pay cuts, job losses and illness due to the coronavirus may not be able to meet their monthly expenses and may feel hopeless and at a loss at to how to proceed. The first step may be to contact your landlord or mortgage company to see if you can defer a few months of payments perhaps to the end of the lease or mortgage. Next, for car leases, contact your leasing company who also may consider deferring a few months’ payments to get you through the crisis. If those steps do not resolve your money issues, you may have to consider filing a personal bankruptcy in a Chapter 7 or 13. If that is the avenue which is pursued, your stimulus payment ( $1200) will not be considered in your income calculation for eligibility for Chapter 7 or your disposable income calculation for Chapter 13 plan payment considerations.

If you have any questions about personal or business bankruptcies, the CARES ACT, or the new small business bankruptcy under Chapter 11 (Sub-Chapter V), please contact Leslie Beth Baskin, Esquire at: lbaskin@sgrvlaw.com or 215-241-8926.

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