Employers with 20 or more employees are generally required to offer continuing health care coverage to departing staff members under the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA). The employer also must notify employees of the availability of COBRA coverage.
Assuming your organization must comply with these requirements, it is likely none of this is news to you. As staff members have left your employment over the years, you have no doubt offered COBRA coverage and attended to the administrative details. However, therein often lies a problem.
With COBRA coverage such a routine part of the employment landscape, it is easy for employers’ processes for issuing and tracking COBRA notices to grow lax.
Under the law, a plan administrator is required to give each participant a notice of certain health insurance coverage rights within 44 days after a ‘qualifying event.’ These include (but are not limited to):
- Voluntary or involuntary termination for reasons other than gross misconduct
- A reduction in hours
- Death of the covered employee
If a plan administrator fails to provide the required COBRA notice, it may be “personally liable to such participant or beneficiary in the amount of up to $110 per day from the day of such failure.”
Beyond the statutory penalties, lawsuits are another major risk for employers. If a former employee claims he or she never received a COBRA notice, you have to be able to prove otherwise.
For example, in the recent case of Perkins v. Rock-Tenn Services, Inc., the employer involved faced such a claim. Fortunately, it was able to produce an affidavit by the delivery manager of its plan administrator stating that, based on a review of computer records, COBRA notices were mailed to the employee on two specific dates. As a result, the U.S. District Court for the Western District of Michigan accepted the employer’s contention that it had complied with COBRA.
a lawsuit happens to your organization, or you are paid a visit from a federal investigator, you will need to prove that you mailed out COBRA notices. Be sure to have established procedures in place for issuing and tracking them. For more information, please contact us.