Bit by the COBRA! Notice Defects Bring Painful Sting

This year, we have seen a string of COBRA class actions seeking monetary penalties on account of defective COBRA notices. Most recently, in Hicks v. Lockheed Martin, the spouse of a former employee alleged various technical defects in Lockheed’s COBRA notice. Although on its face it appeared to include a good deal of required information, the Lockheed notice allegedly failed to state the COBRA coverage termination date, failed to provide an address to which payment should be sent, and failed to sufficiently identify the plan administrator. And, without this information, the notice allegedly failed to be written in a manner calculated to be understood by the average plan participant, as required by regulations. As a result, Lockheed agreed to a $1.25 million settlement “solely to purchase peace.” And, earlier this year, defective COBRA notices also resulted in a $386,000 settlement to end a proposed class action against Firstfleet Inc. Although the DOL offers a model COBRA notice, many employers and COBRA administrators choose to tailor their notices. Whether you follow the model or create your own, be sure to review your plan’s COBRA notice and verify that all of the required regulatory content is included.

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