The Wagner Law Group | Est. 1996

Sophisticated Legal Solutions And Boutique-Style Service

Employer Must Provide Retroactive Coverage and Pay Penalties for COBRA Election Notice Violations

by | Feb 15, 2022 |

The U.S. District Court of Michigan, in Buford v. General Motors, L.L.C., has concluded that an employer’s conduct violated COBRA election notice requirements and warranted the imposition of statutory penalties for the failure to timely provide a COBRA election notice.

Law.  Employers must generally provide COBRA election notices to former employees and other qualified beneficiaries within 44 days of a qualifying event.  (COBRA qualifying events include loss of coverage due to: termination of employment; reduction in hours; death of the employee; divorce or separation from the employee; the employee’s becoming covered by Medicare; and, ceasing to be a dependent child under the plan’s terms.)  Failure to provide the COBRA election notice within this time period can subject employers to a penalty of up to $110 per day, at the discretion of the court, as well as the cost of medical expenses incurred by the qualified beneficiary. 

Background. The plaintiff retired from employment on January 1, 2014, at which time his health coverage should have been changed from employer-paid active coverage to self-paid retiree health coverage.  However, the employer did not terminate the plaintiff’s active-employee health plan coverage until February 28, 2014, and continued to pay for his health coverage as an active employee through that time.

The employer also provided the plaintiff a COBRA election notice with a 60-day election period generally based on the February 28 termination date.  A separate fact sheet and enrollment guide, which was provided to the plaintiff with the COBRA election notice: (i) reflected a February 28 termination date for active employee coverage; and (ii) indicated that he could elect COBRA or be defaulted into the employer’s retiree coverage.

In April 2014, however, the plaintiff was informed by the plan’s third-party administrator (“TPA”) that his 60-day COBRA election period had expired because his COBRA-qualifying event (i.e., retirement) had occurred on January 1, 2014.  The plaintiff proceeded to contest this determination through the plan’s administrative appeal process, but was unsuccessful in  obtaining retroactive COBRA coverage with an effective date of March 1, 2014 (instead of January 1, 2014).  In particular, the TPA informed the plaintiff that retroactively reinstated COBRA would only be available if he paid all COBRA premiums in arrears from January 1, 2014 to the present.

The plaintiff sued the employer to challenge the denial of retroactive COBRA coverage and for statutory penalties.  The issues before the court included whether: (i) the employer had failed to satisfy COBRA’s election notification standards; (ii) the employer erred in denying the plaintiff’s request to elect COBRA; and (iii) the plaintiff was eligible for retroactively reinstated COBRA.

District Court.  At trial, the plaintiff argued that the employer prevented him from exercising his COBRA rights by backdating his retirement date and disregarding the date stated on the COBRA election notice.

The court agreed with the plaintiff, determining that the employer’s failure to correct the plaintiff’s COBRA eligibility date was arbitrary and capricious.  The court reasoned that the employer’s decision to use January 1, 2014, as the end date for the plaintiff’s active-employee health coverage was inconsistent with: (i) the COBRA notice furnished to the plaintiff; and (ii) the employer’s decision to pay for his active-employment coverage through February 28, 2014.

As part of the lawsuit, the plaintiff sought to recover as damages the medical expenses he had incurred during the period he should have been covered by COBRA.  The court decided that the plaintiff could recover these expenses if he paid the premiums owed, beginning on March 1, 2014.

The court also considered whether penalties were warranted in light of the employer’s failure to timely provide a COBRA election notice to the plaintiff.  The court noted that the employer had 44 days in which to provide the plaintiff with a COBRA election  notice.  Using the plaintiff’s retirement date of January1, 2014 as the qualifying event, the court determined that the deadline to timely provide the COBRA election notice was February 13, 2014.  The employer, however, did not mail the plaintiff’s COBRA election notice until February 26, 2014, i.e., 13 days after it was required to be furnished.  The court concluded that the 13-day delay in providing the plaintiff with a COBRA election notice, coupled with the employer’s refusal to honor the election period specified in the plaintiff’s COBRA election notice, merited the assessment of penalties in the amount of $ 1,300 (i.e., $100 per each day that the election notice was late).