Now Is the Time To Update Your COBRA Notices
Miller & Martin PLLC Alerts | May 11, 2020
Author: Christopher Crevasse
On May 1, 2020, the Employee Benefits Security Administration (EBSA) of the Department of Labor (DOL) released new model COBRA notices. The EBSA also issued FAQs discussing the new notices. To avoid potentially devastating COBRA penalties, employers should immediately update their COBRA notices to correspond with the new model notices.
COBRA is the federal law that allows eligible individuals, known as Qualified Beneficiaries, to continue their employer-provided group health coverage when they lose that coverage due to a Qualifying Event, such as termination of employment. Employers who employed at least 20 employees in the previous year are subject to COBRA. One COBRA notice, the General Notice, is provided to employees when they first become eligible for coverage under their employer’s group health plan. Another COBRA notice, the Election Notice, is provided to Qualified Beneficiaries when they lose coverage under their employer’s health plan due to a Qualifying Event.
Plan administrators must provide covered individuals with the General Notice within 90 days after the individuals’ group health plan coverage begins. Plan administrators must provide Qualified Beneficiaries with an Election Notice within 14 days after receiving notice of a Qualifying Event (within 44 days if the plan administrator and the employer that maintains the group health plan are one and the same, as is usually the case). Failure to provide compliant COBRA notices by these deadlines can lead to penalties of up to $110 per day for each violation – that is, for each eligible employee and each Qualified Beneficiary. These penalties can be recovered by health plan participants and beneficiaries.
Plaintiffs have successfully attacked COBRA notices, especially Election Notices, by arguing that the notices do not fully comply with the COBRA regulations or the model notices. Structuring these claims as class actions, plaintiffs have recovered hundreds of thousands – and in some cases, millions – of dollars in settlement or penalties by contending that each late or noncompliant notice triggers the per-day penalty for each affected individual. Even if an employer provides a COBRA notice in a timely fashion, plaintiffs’ attorneys will pick apart the notice to demonstrate an area of noncompliance, no matter how slight, and use that failure to demand per-day penalties on behalf of everyone who received the noncompliant notice, regardless of how minor or inadvertent the error. Notably, employers retain liability for COBRA compliance even if a third-party vendor is hired for COBRA administration.
DOL regulations set forth detailed requirements regarding the content of COBRA notices. Although employers do not have to use the EBSA’s model notices, the DOL considers using the model notices, appropriately completed, to be good-faith compliance with the content requirements set forth in the regulations. As a result, we strongly recommend that employers use the updated model notices for their General Notices and Election Notices. An employer can supplement or enhance the model notices, but only if the expanded notices include all information in the model notices, do not misstate any COBRA-related information, and are not so long or complicated as to be confusing or difficult to understand. If an employer chooses not to use the model notices, it is imperative for the employer to ensure that their COBRA notices nevertheless include all information set forth in the model notices.