Huge Penalty Awarded for Missed COBRA Notice

Posted by BAS - 13 December, 2012

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In a recent district court case, an employer was fined for not providing a COBRA election notice. Cobra Control Services, LLC can make sure that employers properly adhere to COBRA's administrative requirements and help employers manage potential liability.

An employee was terminated from Books-A-Million. When employed, the employee had dental insurance coverage. The employee did not receive a COBRA election notice for her dental coverage and called the employer's Vice President of Human Resources. Books-A-Million did not outsource COBRA administration, and the VP instructed the benefits coordinator to mail the COBRA notice. The benefits coordinator was new to her position and while she said she mailed the former employee a COBRA election form, she had no clear evidence of mailing. The terminated employee said she never received the notice.

The court found that the employer's process for determining those employees who were due to receive notice of their COBRA rights was "unwieldy." The benefits coordinator had to manually cross-reference three lists (insurance report, premium report, termination report) to determine who would receive a COBRA notice.

The employer argued that not sending the COBRA notice was an "innocent mistake." The court found the lack of clear process and the absence of notice was not innocent, but instead was an intentional withholding of the required COBRA notice.

In order to penalize Books-A-Million and deter such action in the future, the court awarded a penalty of $75 per day for the period beginning on the date the COBRA election notice was due and ending at the expiration of the 18-month COBRA period. This resulted in a total penalty of $37,950 imposed on the employer. The plaintiff was also awarded $42,192.58 in attorney's fees and $2,910.87 in costs.

This case, Evans v. Books-A-Million, (N.D. Ala. Oct. 29, 2012) clearly shows the necessity of having clear, predictable COBRA processes. Had Books-A-Million outsourced COBRA administration to CCS, CCS would have been able to produce a copy of proof of mailing of the COBRA notice which would have averted the application of penalties and fees. For information about COBRA administration with CCS, please contact sales@BASusa.com.

Topics: HR & Benefits Compliance


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