Employee Benefits & Executive Compensation Advisory | When Disaster Strikes: Issues and Relief for Health Benefit Plans (UPDATED)

note: This advisory has been updated with new information as of January 17, 2025.

In the period following natural disasters such as Hurricanes Helene and Milton, employer plan sponsors and their participants and beneficiaries will be faced with any number of hardship-related employee benefit plan administration issues. Many of these involve critical questions for employees and employers, such as whether or how health coverage continues if an employer is closed or employees are otherwise unable to come to work, and meeting required plan-related deadlines. While many issues need to be considered on a case-by-case basis depending on the employer’s plan and the situation, guidance provided for past disasters by the IRS and other regulatory agencies in some areas, including issues relating to health plans, tax filings, and leave donation programs, may be helpful. The availability of relief depends on a number of factors, including whether the business or individual (as relevant) is located within a designated disaster area. 

We discuss common employee benefit plan issues and provide a high-level overview of the types of relief that may be available. Due to the fact-specific inquiries applicable to these issues, plan sponsors should consult with benefits counsel in addressing disaster-related situations. 

Health Plan Coverage Issues 

Ensuring continued health care coverage is a critical issue for many employees (and their spouses and dependents) impacted by disaster in the face of business closures and absences from work. In some cases, the Employee Benefits Security Administration (EBSA) may issue formal relief for specified areas within designated disaster zones, as EBSA did in November for Hurricane/Tropical Storm Helene and Hurricane Milton. Other times, specific geographic areas may be outside the FEMA-designated areas discussed above, the specific action may be outside the scope of the guidance, or there may be no formal relief issued at all. In such cases, plan sponsors may want to consider whether similar relief is warranted (subject to insurer approval).¹ Below, we explain the recent EBSA relief issued in response to Helene and Milton, followed by more general guidance for plans outside these areas (or that may be impacted by other disasters for which no formal relief has been issued).

Helene and Milton: Extensions of timeframes during the relief period

On November 8, 2024, the IRS and EBSA published the Extension of Certain Timeframes. This relief extends certain timeframes during a defined “relief period” and operates much like the extensions during the COVID-19 outbreak period. The extension applies only to disaster areas in Florida, Georgia, North Carolina, South Carolina, Tennessee, and Virginia designated as eligible for individual assistance by FEMA due to Hurricane/Tropical Storm Helene and Hurricane Milton. This relief is narrower in some states than the IRS tax filing relief (discussed in the Tax Filing Deadlines section below), which applies to entire states in some cases. The relief period has varying start dates depending on the disaster area and ends on May 1, 2025 for all listed disaster areas. EBSA has also published FAQs that address both welfare and retirement plans for employees affected by these storms. 

To whom do the extensions apply?

The timeframes are extended for:

• Participants, beneficiaries, qualified beneficiaries, or claimants in group health plans and disability and other employee welfare benefit plans (including pension plans) subject to ERISA or the IRC who (1) resided, lived, or worked in one of the disaster areas at the time of the hurricanes or tropical storm; or (2) whose coverage was under an employee benefit plan that was directly affected.
• Group health plans subject to ERISA and the IRC and their sponsors and third-party administrators (TPAs) affected by the hurricanes or tropical storm. An employee benefit plan is “directly affected” if at least one of the following was located in one of the disaster areas at the time of the hurricanes or tropical storm:
  • The principal place of business of the employer (for single-employer plans).
  • The principal place of business of employers that employ more than 50% of the active participants covered by the plan (for plans covering employees of more than one employer).
  • The office of the plan or the plan administrator.
  • The office of the primary recordkeeper serving the plan (for pension plans).

What timeframes are extended?

Extensions for participants, beneficiaries, qualified beneficiaries, or claimants apply to:

• Special enrollment requests (30 or 60 days).
• COBRA 60-day election period.
• COBRA premium payment deadlines.
• Deadline for disability determination notices.
• Claim filing deadline.
• Deadline for filing appeals of adverse benefit determinations.
• Deadline for filing requests for external review.
• Deadline for filing information to perfect a request for external review.

Extensions for group health plans, sponsors, or TPAs apply to:

• Providing COBRA election notice.

What is the applicable relief period for each disaster area?

The relief period varies by location of the FEMA disaster area; to find out which areas are designated by FEMA for individual assistance, click the links below:

• September 23, 2024-May 1, 2025: Florida disaster areas designated as eligible for individual assistance by FEMA due to Hurricane Helene.
• September 24, 2024-May 1, 2025: Georgia disaster areas designated as eligible for individual assistance by FEMA due to Hurricane Helene.
• September 25, 2024-May 1, 2025: North Carolina, South Carolina and Virginia disaster areas designated as eligible for individual assistance by FEMA due to Hurricane or Tropical Storm Helene.
• September 26, 2024-May 1, 2025: Tennessee disaster areas designated as eligible for individual assistance by FEMA due to Tropical Storm Helene.
• October 5, 2024-May 1, 2025: Florida disaster areas not designated as eligible for individual assistance by FEMA due to Hurricane Helene but designated as eligible for Hurricane Milton.

How does the relief period operate to extend the timeframes?

The timeframes are extended by disregarding the relief period for the timeframes listed above. This operates just as the extensions for these same timeframes operate for purposes of the COVID-19 outbreak period. Here are a few examples based on the guidance:

Example #1: Facts. Jane resides in Chatham County, GA. Before Helene, Jane was receiving COBRA coverage under a group health plan. More than 45 days had passed since Jane had elected COBRA, and her monthly premium payments are 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. Jane made a timely September payment but did not make the October payment or any subsequent payments during the relief period. As of May 1, 2025, Jane has made no premium payments for October, November, December, January, February, March, April, and May. Does Jane lose COBRA coverage, and if so, for which month(s)?

Conclusion. The relief period is disregarded for purposes of determining whether monthly COBRA premium installment payments are timely. Premium payments made within 30 days after May 1, 2025, (by May 31, 2025) for October, November, December, January, February, March, April, and May are timely, and Jane is entitled to COBRA for these months if she timely makes payment. Because the due dates for Jane’s premiums would be postponed and her payment for premiums would be retroactive during the initial COBRA election period, Jane’s insurer or plan may initially deny claims and then, after premiums are paid, must make retroactive payment for covered benefits and services received during this time.

Example #2: Facts. Same facts as Example #1. By May 31, 2025, Jane made a payment equal to two months’ premiums. For how long does Jane have COBRA coverage?

Conclusion. Jane is entitled to COBRA coverage for October 2024 and November 2024, the two months for which timely premium payments were made, and she is not entitled to COBRA continuation coverage for any month after November 2024.

Example #3: Facts. (Internal appeal-disability plan). Gary resides in Gulf County, Florida (relief period is September 23, 2024-May 1, 2025) and received a notification of an adverse benefit determination from his disability plan on August 28, 2024. The notification advised Gary that there are 180 days within which to file an appeal. What is Gary’s appeal deadline?

Conclusion. When determining the 180-day period within which Gary’s appeal must be filed, the relief period is disregarded. Consequently, his last day to submit an appeal is 154 days (180 minus 26 days following August 28 to September 23) after May 1, 2025, which is October 2, 2025.

Other relief related to Helene and Milton

In addition to the extensions above, EBSA also published Disaster Relief Notice 2024-01, as well as general FAQs for participants and beneficiaries impacted by Hurricane Helene or Hurricane Milton. EBSA Notice 2024-01 extends deadlines for furnishing notices, disclosures, and other documents required by provisions of Title I of ERISA to plan participants, beneficiaries, and other persons so that employers, plan fiduciaries, and plan sponsors have additional time to meet their obligations. This extension appears to be similar to the relief period described above and appears to apply to summary plan descriptions, summaries of material modifications, benefit determinations, and possibly even the mental health parity comparative analysis so long as a good faith effort is made to provide them as soon as administratively practicable. The FAQs provide practical information for participants.

General guidance in the absence of formal relief

EBSA may not issue formal relief for all disasters. In 2017, in the aftermath of Hurricanes Harvey and Irma, the Department of Labor (DOL) published FAQs similar to those mentioned above for plan participants that provide general information regarding health coverage issues that may arise. The DOL also published guidance that encouraged health plan fiduciaries to make reasonable accommodations to prevent the loss of coverage following a disaster and to minimize the possibility of individuals losing benefits because of a failure to comply with pre-established timeframes.²  Although some of this guidance may be out of date with respect to qualified retirement plans, the information for group health plan sponsors provides “a guiding principle” for plans to “to act reasonably, prudently and in the interest of the workers and their families who rely on their health plans for their physical and economic well-being.”

The DOL has acknowledged that there may be instances when full and timely compliance by group health plans and issuers may not be possible and that their approach to enforcement will be marked by an emphasis on compliance assistance and include grace periods and other relief where appropriate, including when physical disruption to a plan or a service provider’s principal place of business makes compliance with preestablished timeframes for certain claims decisions or disclosures impossible.

In addressing many health plan issues, the health insurer or third-party administrator will be heavily involved. In other cases, employers or plan sponsors will need to make judgment calls on a case-by-case basis. Issues such as the following will arise:

• If the business is temporarily closed and payroll is delayed, how long can or should coverage continue?
• If specific employees cannot return to work, can coverage continue during an unpaid leave, and if so, for how long?
• Can substantiation requirements for health and flexible-spending-account claims be relaxed, and to what extent?³
• Can enrollment or qualified election change periods be extended or waived (even for areas outside the scope of the relief described above)?
• Can COBRA election periods be extended?

In every case, the employer or plan administrator should carefully review its insurance and contract documentation and work carefully with impacted plan administrators and carriers (including stop-loss carriers) and confer with legal counsel when necessary.

Tax Filing Deadlines

The Internal Revenue Service (IRS) has an established procedure for waiving certain tax filing and payment deadlines for taxpayers affected by presidentially declared disasters. The deadlines that are waived through this process include a number of employee benefit plan-related deadlines, including the deadline for filing Forms 5500. The availability of the relief is triggered by the IRS through a press release or other announcement relating to a specific event.

The IRS announces when this relief is available and posts the information on its website. This relief allows affected taxpayers (including businesses and individuals) an extension to file certain returns and pay certain taxes that were originally due on or after the date of the disaster. This relief also applies to certain individual and business taxpayers with valid filing extensions that run out on October 16 (for individuals) and September 15 (for businesses). Note, though, that these extensions generally do not apply for paying taxes that were due before the date of the declared disaster. Deadlines vary depending upon the disaster and locality – usually by county, but note that for Helene, the entire states of Alabama, Florida, Georgia, North Carolina, and South Carolina received this relief. Note that the tax filing relief for these states is broader than the mandated extensions for certain times discussed above in the Extensions of Timeframes During the Relief Period section. More information on recent disaster relief for presidentially declared disasters is on the IRS’s Around the Nation webpage. Click the links below for details on which states’ counties have been affected by recent disasters:

• Taxpayers in all or parts of Connecticut, Florida, Illinois, Kentucky, Louisiana, Minnesota, Missouri, New York, Pennsylvania, Puerto Rico, South Dakota, Texas, Vermont, Virgin Islands and Washington State have until February 3, 2025 to file their 2023 tax year returns.
• Taxpayers affected by Helene in all or parts of Alabama, Florida, Georgia, North Carolina, South Carolina, Tennessee and Virginia will have until May 1, 2025 to file their 2023 tax year returns.

Leave Donation Programs

Employers may assist their employees to help others cope with disaster through a leave donation program. As a general rule, employees would be taxed on the full value of any leave they donate under longstanding tax concepts. If certain requirements are met, the taxation may shift to the recipient of the donated leave. There are three different options available:

1. Leave donation programs that allow employees to transfer leave to employees who are absent from work as a result of a presidentially declared major disaster. These programs are also referred to as “leave-sharing” programs.
2. Leave donation programs through which the employer makes contributions to a charitable organization. In these programs, the donating employee gives up some or all of their unused leave, and the cash value is donated by the employer as a charitable contribution.
3. Leave donation programs that allow employees to transfer leave to employees who are absent from work as a result of a medical emergency. These programs are also “leave-sharing” programs but have different rules.

Leave donation to employees adversely affected by a presidentially declared major disaster

After providing guidance on leave donation programs in response to various disasters, the IRS provided permanent guidance on such programs for major disasters declared by the President that warrant individual assistance or individual and public assistance from the federal government. The FEMA website provides information on which disasters and which locations have received such designations. A disaster-related leave program of this nature allows employees to deposit leave for transfer to employees who are adversely affected by a major disaster. An employee is considered to be adversely affected by a major disaster if the disaster has caused severe hardship to an employee or their family member that requires the employee to be absent from work.

If IRS requirements are satisfied, the employee donating the leave is not taxed on the value of the leave (and also is not entitled to a charitable or loss deduction for the leave). Instead, the leave is treated as compensation to the recipient, including for payroll tax (FICA and FUTA) and income tax purposes. The employer is entitled to a deduction for the payment of wages to the leave recipient (just at is would have been if the donating employee had taken the leave) and is responsible for payroll taxes and wage withholding on such amounts. In most cases, an unfunded leave-sharing program will not be subject to ERISA.

Among the requirements for such a program are:

• It must be in writing.
• Donors cannot deposit leave for transfer to a specific recipient. Rather, the donated leave must be redistributed based upon the provisions of the bona fide plan.
• The amount of donated leave must be limited to the maximum amount of leave the donor accrues during a single year (i.e., there cannot be donations of multiple years of accrued leave).
• The recipient must exhaust all paid leave available before using the leave bank.
• The recipient must request paid leave in writing, and the employer must approve the leave. Thus, a request-and-claims review process must be established and administered.
• The recipient must receive the paid leave at their normal rate of compensation (and not at the donor’s rate).
• The leave must be used for purposes related to the major disaster.
• There must be a reasonable limit on the period of time after the event in which the leave can be deposited into the bank and used by recipients. For major disasters, leave deposited for one major disaster may only be used for that disaster. (An exception applies, however, for small amounts that make accounting unreasonable or administratively impracticable.) Any leave not used after the time limit must be returned to the donors (who still are employees) on a prorated basis (amount donated in proportion to the total amount of leave donated on account of the disaster).
• There cannot be a cash-out feature for the donated leave, but (1) recipients may use leave to eliminate a negative balance that arose from leave that was advanced to the recipient; and (2) recipients may substitute leave received under the plan for leave without pay used because of the major disaster or medical emergency.
• The amount of leave available under the plan to individual recipients must be reasonable and based on need.

Charitable donation disaster-related leave programs

Programs in which employees can donate unused leave in the form of charitable contributions will, as a rule, be taxable to the employee donating the leave. For previous disasters such as Hurricanes Harvey and Irma in 2017 (Notice 2017-52) and the COVID-19 pandemic in 2020 (Notice 2020-46), the IRS has provided temporary exceptions from taxation for leave programs under which employees elect to forgo vacation, sick time, or personal leave in exchange for cash payments that the employer makes to charitable organizations for the relief of victims of a particular disaster. This exception applies so long as the qualifying leave donations are made by the deadline set by the IRS for a particular disaster. Such payments are not includible in the income or wages of the donating employees, employees may not claim a charitable contribution for such payments, and the employer may deduct the payments as a business expense rather than a charitable contribution. The IRS has not yet issued any such exceptions or guidance for these programs in the aftermath of Hurricanes Helene and Milton.

Leave donation to employees with a medical emergency

IRS guidance on leave donation programs that allow employees to transfer leave to employees experiencing a medical emergency dates back to the 1990s and requires no special announcement from a government agency to implement. Many employers may have already adopted such programs; the medical emergency need not relate to a disaster. A “medical emergency” is a medical condition of the employee or their family member that will cause prolonged absence from work. The requirements for such a program and the tax consequences, are generally similar to those for programs that allow employees to transfer leave to other employees adversely impacted by a disaster, although there are some differences.

Websites to Check for Updates

• IRS: Around the Nation
• FEMA website
• DOL/EBSA: Disaster Relief Information for Employers and Advisers
• DOL/EBSA: Disaster Relief Information for Workers and Families

Conclusion

Employers will continue to face many employee benefit-related issues during the aftermath and rebuilding process following hurricanes. Federal regulatory agencies have provided relief that may be applicable in a variety of circumstances. Determining what is needed and what relief may be available will nevertheless often require a case-by-case analysis. 

Endnotes

1. Recall that when the COVID-19 outbreak period was winding down and plan sponsors were no longer required to allow extended timeframes for filing claims, electing COBRA, or requesting special enrollment (as well as other deadlines and timeframes), group health plans were reminded that “nothing in the Code or ERISA prevents a group health plan from allowing for longer timeframes for employees, participants, or beneficiaries to complete these actions, and group health plans are encouraged to do so.” See FAQ 5 of the FAQs Part 58.

2. Available at Compliance Guidance for Employee Benefit Plans Impacted by Hurricane Harvey and Compliance Guidance for Employee Benefit Plans Impacted by Hurricane Irma.

3. In the Office of Chief Counsel Memorandum from April 2023, the IRS rejects certain common substantiation practices. There is no mention of whether any allowance would be permissible for disasters or hardships.

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