COBRA Notices Potentially Subject to Class Action Litigation if Not Complete
While notices pursuant to the Consolidated Omnibus Budget Reconciliation Act (“COBRA”) are viewed as fairly standard, some plaintiffs’ counsel have recently zoomed in on the type of information included in these notices. Recently in Florida, three separate class action lawsuits alleged that the employer’s COBRA notice did not comply with the Department of Labor regulation.
COBRA, an amendment to the Employee Retirement Income Security Act (“ERISA”), applies to employers with at least 20 employees on more than 50 percent of its typical business days in the previous calendar year who provide a group health plan. COBRA requires the plan administrator to provide certain notices to plan participants, both upon initial enrollment in the plan and upon a qualifying event, such as a termination of employment or divorce, if that event results in the loss of health plan coverage or an increase in the premiums being charged to the individual.
In the most recent case, the spouse of a former employee of a technology company alleged that the COBRA notice they received failed to identify a termination date for the health care coverage, location of where payments should be sent, and name of the plan administrator. In the suit, she sought to certify a class of the company’s Group Benefits Plan participants and requested statutory penalties of $110 to each participant or beneficiary per day that the company allegedly failed to comply with the notice requirements.
While this case and another case in Florida have settled, a third case with similar allegations remains pending.
The good news is that compliance with the COBRA notice requirements is straightforward. The Department of Labor has available a model notice that employers should review for assistance in drafting their own notices. Given the uptick in litigation surrounding these notices, strict compliance with the model notice is encouraged.