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SunTrust Banks learned an expensive lesson about COBRA compliance recently. It was sued for failure to send proper COBRA election notices after employees terminated employment. SunTrust’s agent for COBRA notice purposes, Xerox HR Solutions, actually sent timely COBRA notices to the former employees.  But two former employees/plaintiffs claimed that the notices were legally insufficient and, as a result, “misleading and confusing.”  The notice directed them to a website to elect COBRA coverage but they apparently could not figure out how to actually make the COBRA election. As a result, the two former employees did not obtain COBRA coverage. 

The two former employees filed a lawsuit seeking “class action” status to include other former employees to make their lawsuit more meaningful to SunTrust.  They alleged the SunTrust COBRA notice was deficient because it did not adequately address two of the 14 content requirements of the Department of Labor’s COBRA notice regulations.  Specifically, they said the notice: (1) failed to state the name and address of the party responsible for administration of COBRA benefits and (2) failed to provide the COBRA election procedures or election forms.

The complaint states that both plaintiffs could not find the “election form” to elect COBRA coverage on the website to which they were directed because it was a general HR website. Available information about the lawsuit does not tell us if either of the plaintiffs tried to call the phone number listed five times in the COBRA notice as the alternative way to elect COBRA coverage and for other questions and more information about COBRA rights. 

The two plaintiffs were seeking (a) statutory penalties of $110/day for each class member who received a defective COBRA notice, (b) attorneys’ fees, costs and expenses; (c) injunctive and other equitable relief and (d) any other relief in the court’s discretion.  Plaintiffs did not sue for payment of medical expenses.  Essentially, they just wanted statutory penalties and attorneys’ fees.

SunTrust ultimately settled the lawsuit for $290,000. It also had to pay the plaintiffs $103,556 in attorneys’ fees and costs. (It is a good guess that SunTrust paid its own attorneys even more than that.)  That’s a lot of money for an allegedly technically deficient COBRA notice.

Even though many aspects of benefit plan administration have become routine, employers must remember to require compliance with and confirm that the content requirements of the COBRA notice regulations are included in their own COBRA notices.

If your notice fails on a “technicality” or perhaps even a substantive requirement, get it fixed now before your COBRA notice becomes the subject of a lawsuit.  You may even want to tap your favorite “tester” employee to review the notice and determine how easily he/she can understand the COBRA notice and elect coverage.  And while you’re at it, make sure that your agreement for COBRA services provides appropriate representations and indemnity from your vendor.  However, as plan administrator, you as the employer – not the vendor – are ultimately responsible for your benefit plan compliance.