The statutory penalty for COBRA notice violations can easily add up in light of ERISA’s statutory penalties of up to $110/day per participant or beneficiary for each failure to send a compliant COBRA notice – making COBRA notice litigation attractive to the plaintiffs’ bar.  (Note there are also self-reporting $100/day penalties under the Code.)  In most of the class action lawsuits, plaintiffs allege that their employer sent a late and/or deficient COBRA election notice resulting in harm to the plaintiffs and ask the court to award the statutory penalties to the class members.   In a new proposed class action settlement, an employer will pay $1 million to settle claims related to allegations of deficient and late COBRA notices.  Also, another class action lawsuit filed last week alleges that an employer’s COBRA election notice was both late and deficient, resulting in economic injuries to the plaintiffs.  

One basic step employers can take to defend against such lawsuits is to review their COBRA election notice, including their COBRA administrators' notice, if they use that instead of their own, to ensure it meets the content requirements of the regulations, including the requirement that the notice is “written in a manner calculated to be understood by the average plan participant.”  Employers should also ensure their COBRA administrator sends the COBRA election notice to qualified beneficiaries within the timeframes required by ERISA and the Code. 

You can read the new class action lawsuit complaint here 

 MurphyAutoClub_LongNotice_v1.pdf