A penalty awarded in a recent court case provides one more reason for employers to implement proper COBRA administrative processes.
In Fama v. Design Assistance Corp., (3rd Cir. 2013), the employer failed to provide the plaintiff with a COBRA election opportunity when she terminated employment in September 2008. COBRA requires that the employer inform the administrator of a qualifying event within 30 days, and then the administrator has 14 days to notify the employee of the right to continue coverage.
In May 2009, the former employee, through counsel, contacted the employer and advised the employer that it had not sent the required COBRA notice. The employer responded by saying that the individual was not entitled to notice. The company observed that after the individual stopped working, the company mistakenly continued coverage for the individual for several months. In March 2009, the company realized its mistake and cancelled coverage back to January 1, 2009. At some point, the employer reinstated coverage, and then in September 2009, almost a year after her termination, cancelled coverage and issued a COBRA notice.
Interestingly, this court did not take into account the fact that the individual had coverage (albeit mistakenly) for several months after termination. The court asserted that the employee was due a COBRA notice upon the termination of employment, and that date, not the loss of coverage date, was the qualifying event to start the running of the notice period.
The court could have awarded a penalty of up to $110 per day, but the employer did not act in bad faith or with malicious intent. This served to mitigate the dollar amount of the penalty, which was limited to $10 per day.
Employers should take care to set processes and procedures for sending the required notices upon termination of employment and other COBRA qualifying events. BAS’ COBRA Control Services can assist with COBRA administration. For more information, contact info@BASusa.com.