Cobra is not just the name of a group of poisonous snakes. It’s also the acronym used for the Consolidated Omnibus Budget Reconciliation Act (COBRA). Though some wonder if COBRA has a long term future with the existence of Exchanges, COBRA is still law and employers must continue to comply.
COBRA in the benefits world gives employees and their families who lose coverage the right to continue group health benefits for certain periods of time upon the occurrence of a COBRA qualifying event, such as termination of employment, reduction in hours, death, and divorce. COBRA also requires that employers subject to the law provide certain notices to employees, including a COBRA election notice. Many individuals may opt for Exchange coverage in lieu of COBRA coverage, this does not eliminate an employer’s notification responsibilities.
An $83,000 reminder
In the case of Evans v. Books-A-Million, the Eleventh Circuit recently affirmed a trial court’s award of close to $83,000 in penalties, attorney’s fees, and costs to a former employee who filed suit against her employer for failure to provide a COBRA election notice. The employer failed to provide an election notice giving the former employee the opportunity to elect COBRA coverage for the employer’s dental plan.
The employer argued that its failure to provide the election notice was an innocent mistake resulting from among other things confusing employee records and a newly hired benefits coordinator. The trial court did not agree that the failure to provide the election notice was inadvertent, especially since the employer had been given multiple opportunities to provide the notice but failed to do so.
Upon a finding that the employer’s failure to provide the election notice was intentional and in bad faith, the trial court imposed a penalty of $75 per day calculated from the 45th day after the employee’s termination of employment through the end of her 18-month COBRA coverage period. The Eleventh Circuit upheld this penalty.
Don’t get bitten!
Employers are subject to more and more notification requirements in this ever-changing benefits world. As employers try to navigate ACA and other employee benefits laws, it can become overwhelming to develop strategies and administration procedures to ensure compliance. This case provides a strong reminder that these strategies and procedures are vital to avoid costly penalties that in this day and time could result in significant financial damage to most companies.
Please contact our office if you have any questions about your COBRA compliance obligations and notification requirements.
