A former Bank of America employee filed a proposed class action in Florida federal court alleging the bank provided employees with noncompliant, "confusing and piecemeal" COBRA notices in an effort to save money, willfully violating the Employee Retirement Income Security Act. This is not the first class action filed for poorly drafted COBRA notices. The daily penalty that can be imposed per violation is staggering.
Other cases that have been filed allege that the COBRA notices were missing items that are required by the Department of Labor's model notice. For example, the name and contact information of the plan administrator. It is common for a third-party vendor who is typically drafting the COBRA Notice to fail to identify the plan administrator. This is due, in part, because the payments made for COBRA are mailed to the third-party vendor. Many times the third-party vendor's systems fail to input all the correct data.
Other examples of deficiencies in COBRA notices include: (i) the notices did not provide details on how to enroll in COBRA or did not enclose a physical enrollment form; (ii) multiple COBRA letters, rather than just one, were sent; and (iii) only a second letter (typically sent after the participant indicates he or she elects COBRA coverage) provided the address to where payment should be sent. Interestingly, the court did not grant a motion to dismiss. The judge stated that since the COBRA notice was not identical to the Department of Labor's model notice, the plaintiff stated a claim that could proceed to discovery.
The remedy that plaintiffs seek is the statutory penalties and other damages. Under ERISA § 502(c)(1), COBRA qualified beneficiaries are entitled to request up to $110 per day per person for a plan administrator's failure to provide the required COBRA notices. Additionally under ERISA, a judge has the discretion to award legal fees to the plaintiff's counsel under ERISA § 502(g)(1).
Employers should confirm they are using the Department of Labor's model notices and timely getting these notices delivered properly (see new Department of Labor electronic notification rules). Additionally, please have your COBRA notices reviewed to confirm they are compliant with ERISA, the Internal Revenue Code and COBRA. Further, do your fiduciary duty of monitoring your vendors. Call up your COBRA administrator and have them provide to you in writing how their COBRA notice complies with law. Consider doing a request for proposal to see what other COBRA vendors are doing, at what price and what other services to they offer that could be better for plan participants. Document your process no matter the outcome and decision made.
Now with the CARES Act keeping COBRA notices open as long as the pandemic is legally in force, it is more important to review your COBRA notices.
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