What may seem so insigificant as a single non-mailing of a qualifying event can trigger heafty fines by the IRS, the Department of Labor and/or the Department of Health and Human Services. Below are some actual case studies.It is important to remember that these cases do not include the lost goodwill, damaged employee relations, and attorney's fees related to the litigation of these cases. Case Study #1: Fink v. Dakotacare
In Fink v. Dakotacare
, a plan sponsor/employer terminated a COBRA-qualifying plan and replaced that coverage with a new plan. A COBRA participant provided written notice that she would not be enrolling in the new plan, because she had applied for coverage with her new employer. Shortly thereafter, however—upon discovering that her daughter was admitted for inpatient psychiatric care—she paid COBRA premium to the former plan administrator. In ruling that the employer/plan sponsor and related fiduciaries wrongfully terminated continuation coverage, the 8th Circuit reasoned that because the premium was timely paid in accordance with the plan in effect at the time payment was made, the participant’s written notice declining coverage was not binding
. The Court held that it was the responsibility of the plan fiduciaries to forward the premium to the proper plan. No. 02-1679 (8th Circuit, March 31, 2003 View Entire Court Opinion on Fink v. Dakotacare Case Study #2: Torres-Negron v. Ramallo Brothers Printing
In Torres-Negron v. Ramallo Brothers Printing
, an employer was fined $24,390 for failing to provide a COBRA notice
to its former Director of Human Resources following her termination. In assessing statutory penalties of $45 per day per qualified beneficiary, the Court held that it was not relevant that the plaintiff knew of her COBRA rights in absence of the notice. The employer had an affirmative duty to provide plaintiff notice of her right to continuation coverage and that duty was not mitigated by her knowledge of the law. In addition to ERISA penalties, the Court ordered the employer to pay the plaintiff’s costs and attorney’s fees. Torres-Negron v. Ramallo Brothers Printing, Inc.
, 203 F.Supp 2d 120 (D. Puerto Rico, 2002). View Entire Court Opinion on Torres-Negron v. Ramallo Case Study #3: Vincent v. Wells Fargo Guard Services, Inc.
In Vincent v. Wells Fargo Guard Services, Inc.
, Vincent brought suit under 29 U.S.C. §1132(c) against his former employer and other fiduciaries for failing to provide him with a COBRA notice following his termination. The Court held that, although the "employee benefits manager" of Wells Fargo was the designated plan administrator, neither Wells Fargo nor its employee benefits manager could be held liable for the notice failure because Wells Fargo outsourced its COBRA administration to a third party
. View Entire Court Opinion on Vincent v. Wells Fargo Guard Services, Inc. Case Study #4: Middleton v. The Russell Group, Ltd.
In Middleton v. The Russell Group, Ltd.
, an employer was fined the maximum per-day COBRA penalty - in this case, totaling $74,000
- because the Court found that the employer acted with bad faith and "enormous" prejudice in failing to provide a COBRA notice following a qualifying event. View Entire Court Opinion on Middleton v. The Russell Group, Ltd.