Outside COBRA admins liable for notice delays — Business Management Daily: Free Reports on Human Resources, Employment Law, Office Management, Office Communication, Office Technology and Small Business Tax Business Management Daily
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Outside COBRA admins liable for notice delays

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in Compensation and Benefits

If you use an outside plan administrator to take care of sending COBRA notices to terminated employees, it is liable for any delay penalties.

It’s another reason to outsource the COBRA notification function.

Recent case: Aneka lost her job with Discover. She later sued the company, claiming that she didn’t receive the required health insurance continuation coverage letter within 44 days of her termination.

ERISA—the Employment Retirement Income Security Act of 1974—provides former employees with the option of continuing health care coverage under the employer’s plan. To ensure that employees are aware of their rights under the act, employers must notify the plan administrator within 30 days of the date of the qualified event such as discharge.

The plan administrator is, in turn, required to notify employees of their right to continued coverage within 14 days of the employer’s notification, making 44 days the outside limit for notice. The penalty for delay is up to $100 per day.

Discover argued it sent the administrator its notice in a timely manner and therefore was off the hook. The court agreed and dismissed Aneka’s claim. (Myrick v. Discover, No. 16-1966, 3rd Cir., 2016)

Final note: The court concluded that Aneka either missed the COBRA notice or it somehow got lost in the mail, because it declined to hold the plan administrator liable, either. The administrator firm showed the court computer screen captures displaying the date it generated the COBRA notice (which was within the required period) and testified about the process it used to mail out notices.

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