Improper COBRA notification comes back to bite employer
The ruling in a case before a New Jersey federal court is a reminder that the rules of the Consolidated Omnibus Budget Reconciliation Act (COBRA), like the reptile that shares its name, must be respected.
Three of five claims in the case were dismissed. And while it is up to the employee who brought the case to amend a hostile work environment claim to proceed with it, the COBRA charge will bring this employer back to court.
The case of the missing COBRA notice
The plaintiff in the case, a 10-year employee of the defendant, claims the COBRA notices the employer provided her upon separation from employment were inadequate.
The employer had provided a severance agreement, which stated that the employee would “receive a COBRA ... Election Notice ... at [her] home address within the next 14 Business Days.” The agreement further stated that the COBRA Election Notice would include information about the former employee’s COBRA coverage and alternative options.
The employer moved to dismiss the COBRA-related claim, arguing that the severance agreement was sufficient to comply with the notice requirements of COBRA. The employee contended, however, that although the severance agreement gave the initial notice of rights under COBRA, it failed to indicate whether the employee received the additional information about COBRA or if the employer had timely processed the employee’s request for continued coverage. The court agreed and denied the employer’s motion to dismiss, finding that the claim should proceed to trial.
While the outcome of this case is yet to be determined, the court’s denying the motion to dismiss is a reminder that severance agreements cannot substitute for complete COBRA compliance.
Employers might coordinate their severance agreements and COBRA notifications but must provide all required notifications as required by federal law, including timely notification to the plan administrator of the COBRA qualifying event and provision of an election notice to the employee and related qualified beneficiaries.
What is COBRA?
COBRA gives workers and their families who lose their health benefits the right to choose to continue group health benefits provided by their group health plan for limited periods of time under certain circumstances such as:
- Voluntary or involuntary job loss;
- Reduction in the hours worked;
- Transition between jobs;
- Death, divorce, and other life events.
While COBRA can be administered by the employer or a third-party, the obligation to comply with the law falls to the employer.
4 steps to COBRA compliance
To be compliant, COBRA administration requires these four steps:
- Notify all eligible group health care participants of their COBRA rights.
- Provide timely notice of COBRA eligibility, enrollment forms, duration of coverage and terms of payment after a qualifying event has occurred.
- Collect premiums, reinstate coverage, and supply appropriate notices if premiums are not received.
- Provide timely notices when COBRA coverage ends before the expected duration and respond to individuals seeking coverage who are not eligible for COBRA.
Key to remember: Severance notices that merely mention COBRA do not meet the federal requirements for notification.
Davis v. World Insurance Associates, LLC, et al.
