by Gwen Cofield
Although an employer or plan administrator is not required to ensure actual receipt of the Consolidated Omnibus Budget Reconciliation Act (COBRA) notice, a good-faith effort to provide the COBRA notice must be made. Where an administrative error prevents the receipt of the COBRA notice, an employer or plan administrator can demonstrate good-faith compliance by establishing and following normal notice procedures.
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The 2nd U.S. Circuit Court of Appeals—which covers Connecticut, New York, and Vermont—affirmed that an employer/plan administrator’s improperly addressed COBRA notice—the town name was abbreviated for formatting reasons—did not render the notice invalid. This was particularly the case when the employer acted in good faith and provided evidence of standard mailing procedures, as well as a copy of the notice validating those procedures. The case is Vangas v. Montefiore Medical Center, 2016 WL 2909354 (2nd Cir. May 19, 2016).
Facts of the case
On March 25, 2010, “Rose,” an employee of Montefiore Medical Center (MMC), was diagnosed with cancer and went on immediate leave under the Family and Medical Leave Act (FMLA). After she exhausted the FMLA leave and was unable to return to work, MMC terminated her employment on August 30, 2010. Rose never elected COBRA coverage and was allegedly sent a letter notifying her that her and her covered family members were no longer eligible for coverage.
MMC, with the assistance of its outside vendor, WageWorks®, administered its COBRA program according to established procedures (as described to the court by its benefits director). Upon an employee’s termination, MMC sent WageWorks an electronic file through MMC’s benefits administrator. Typically, within 3 to 5 business days after it received the file, WageWorks would mail a letter to the employee describing the cost of COBRA coverage and the election period. If the election period lapsed and the terminated employee did not enroll, WageWorks would send a letter notifying the employee that he or she was no longer eligible for coverage.
Rose contended that she never received a COBRA election notice, and she and her husband sued MMC. They sought reimbursement of medical expenses, statutory damages of $110 per day from the date MMC was obligated to provide a COBRA notice until the date the legal judgment is entered, and attorneys’ fees and costs.
The key issue was whether Rose’s mailing address was correct for COBRA purposes. Testimony in the lower court proceedings (2014 WL 5786720 (S.D.N.Y., Nov. 5, 2014)) indicated that Rose lived in the town of Cornwall-on-Hudson, New York. The ZIP code was correct but the town was abbreviated in the COBRA election notice to “Cornwallonhuds.” MMC’s benefits director testified this was likely because of a character limit in the “Town” field in the electronic system.
Rose testified that she did not receive the COBRA notice, but conceded that she received at least 18 pieces of other mail with the town name similarly abbreviated, and even received mail without the ZIP code. MMC’s benefits director testified that she could view electronically that WageWorks received Rose’s file on September 24, 2010, and mailed the COBRA notices on September 27, 2010.
The lower court did find that the notices was improperly addressed because MMC did not use the only “acceptable” abbreviation for Cornwall-on-Hudson. Although that error “may not have been particularly egregious,” it did not automatically entitle MMC to a presumption of a proper address mailing for COBRA notice compliance purposes, the lower court had found. Ultimately, the lower court found that MMC had satisfied its COBRA notice duties because the notices were reasonably calculated to reach Rose, and it ruled in MMC’s favor. Rose appealed.
In affirming the lower court’s decision, the 2nd Circuit first noted that “the incorrectly abbreviated town name on the COBRA notice does not render the notice invalid.” Rose’s argument to the contrary was unpersuasive since she had received 18 other pieces of incorrectly addressed mail, including mail without the ZIP code.
Furthermore, the 2nd Circuit noted that MMC provided evidence on its COBRA notice procedures. As noted above, within 3 to 5 business days of receiving an electronic file regarding terminated employees, WageWorks mails a letter to the employee that explains COBRA coverage and the enrollment period.
If the employee does not respond in 60 days, WageWorks sends notice that the employee is no longer eligible. MMC admitted into evidence a copy of Rose’s COBRA notice and the letter explaining that she was no longer eligible. MMC’s benefits director also testified that she saw on her computer system that WageWorks received s’ file on September 24, 2010, and that the first COBRA notice was mailed on September 27, 2010.
“MMC presented sufficient evidence of its procedures for ensuring COBRA notices are properly and timely mailed and that those procedures were followed in this case. The evidence established that MMC attempted to mail the notices to Rose and her husband’s last known address and were thus reasonably calculated to reach them,” the appeals court concluded.
Implications
COBRA provides that a termination of employment or reduction in hours that results in a loss of coverage is a qualifying event entitling a qualified beneficiary to up to 18 months of COBRA coverage. An employer has up to 30 days to notify a plan administrator of a qualifying event. In turn, the plan administrator has 14 days from the date of that notice to send a COBRA election notice. A plan administrator that fails to meet COBRA’s notice requirements may be subject to statutory penalties of up to $110 per day.
COBRA’s notice requirements, however, do not require that the employer or plan administrator ensure that the qualified beneficiary actually receive the COBRA notice. Instead, the employer or plan administrator must make good-faith efforts to provide the notice. In determining whether good faith is present, courts will review the COBRA procedures to assess whether they are reasonable and were followed.
An employer or plan administrator that has standard mailing procedures—and has records validating them —has a strong defense against COBRA notice claims. Here, evidence of MMC’s procedures supported MMC’s good-faith compliance and helped get the COBRA claim dismissed in the lower court despite the improperly addressed notice. This case is a reminder that COBRA notice procedures should be regularly reviewed to look for, and remedy, administrative errors or shortcuts that can give rise to legal challenges.
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Gwen Cofield is an editorial/communications professional with more than 20 years of experience in the for-profit, non-profit and government sectors. |