Employer pays big fines for COBRA violations; no lessons to be learned

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August 22, 2014 by Tony Novak

I spent a little tome today reading up on the Books-a-Million court case where the courts awarded and affirmed substantial damages for intentional violation of COBRA. My intent is to look for relevant information for the web site COBRAplan.com. In the end, I found nothing useful to report. First of all, I am looking at the issue from the perspective of the small business market that I serve. Books-a-Million’s profile shows they are a public company based in Alabama with 5,500 employees in over 250 locations. So the relevance for small business benefit plans is doubtful from the start. Second it is clear that the fact of this case are entangled with other issues unrelated to COBRA handling and it is easy to conclude that the COBRA violations are secondary to whatever else was going on in this troubled relationship between employer and former employee.

EBIA commented “This case provides a compelling reminder of the importance of providing COBRA election notices on a timely basis to all qualified beneficiaries who are eligible to elect COBRA. As illustrated here, the failure to provide even one COBRA notice to one employee can have significant financial consequences— penalties may be assessed at a court’s discretion in amounts of up to $110 per day, and attorney’s fees and costs add up quickly. It is easy to imagine how a single dental plan notice might be overlooked during day-to-day business operations. To minimize such risks, employers, in their role as plan administrators, should establish and follow comprehensive COBRA administration procedures under which all required notices are diligently prepared and timely distributed”. I would disagree and don’t quite see it that way. WHile this case might be used as a COBRA scare tactic but hardly represents a typical oversight situation, This is a case where the relationship between employer and employee broke down leading to a “war of the roses” situation where each appears ready to destroy the other. This is not a case example of typical unintentional COBRA notice oversight.

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