Is it better to mail COBRA notices to qualified beneficiaries or hand-deliver them if the dependent is of an active employee?
Quick Answer
It is better to send the notice via first-class mail.
Legal Perspective
Bricker Graydon LLP
Cincinnati, Ohio
Hand-delivery to an employee is acceptable, but it’s not guaranteed it will constitute notice to other qualified beneficiaries – like the employee’s spouse or children, says employee benefits attorney Lyndsey Barnett (lbarnett@brickergraydon.com) of the firm Bricker Graydon LLP.
Plus, it’s difficult to prove hand-delivery without a signed receipt from the employee.
So a more reliable and statutorily-approved method of sending notice is through first-class mail. Just make sure you have the worker’s current mailing address.
Relevant Case Law
Crotty v. Dakotacare Administrative Services
Phillips v. Saratoga Harness Racing, Inc.
Simpson v. T.D. Williamson
HR Insight
Gulf Coast Regional Blood Center
Houston, Texas
We send them written correspondence as required by our plan, says HR Manager Rodney Green. We must notify if the qualifying event is:
- termination or reduction in hours of employment of the covered employee
- death of the covered employee
- covered employee becoming entitled to Medicare, or
- employer bankruptcy.
Oriana House Inc.
Akron, Ohio
Mail COBRA notices to their home addresses on file, according to Director of HR Jodi Glitzenstein.
Westside Family Healthcare
Wilmington, Delaware
We have handled COBRA issues in general both manually and using a third-party administrator (TPA), says HR Director Aggie Flores.
I highly suggest the TPA. Handling COBRA notices manually can be very time-consuming, even with a small workforce. There have to be reminders for reaching a certain age, every new hire has to receive notices, and then every termination must receive notices within 14 days of termination. The most efficient and effective way is to integrate payroll and a TPA so everything is automated.
The Cost of Noncompliance
McDonald’s Corp. pays $156K to settle COBRA dispute
Who was involved: McDonald’s Corp., the world’s largest fast-food chain, and a former employee who sued on behalf of herself and similarly situated employees.
What happened: According to the class-action suit, the fast-food giant violated the Consolidated Omnibus Budget Reconciliation Act by sending out deficient COBRA notices to former employees. Specifically, the complaint alleged the company declined to use the DOL’s Model COBRA Notice, and instead sent out multiple COBRA notices “containing bits and pieces of information on COBRA.” The suit claimed the company’s decision to send out “piecemeal” COBRA info “confused and mislead” the plaintiff, causing her “economic injuries in the form of lost health insurance and unpaid medical bills, as well as informational injuries.”
Result: McDonald’s Corp. agreed to pay $156,752.50 to settle the dispute, which was to be distributed as follows:
- Approximately $52,263 for attorneys’ fees and costs, and
- The remaining balance would be distributed among class members.
Info: Settlement agreement in Johnson v. McDonald’s Corp., 9/22/22.
Missing COBRA notices: Trucking company pays $390K
Who was involved: Ryder Systems, Inc., a trucking and transportation company, and a former employee in Florida.
What happened: The worker filed a proposed class-action lawsuit on behalf of himself and similarly situated former employees, alleging the company violated federal law by failing to provide appropriate COBRA notices.
Result: The company agreed to pay $390,000 to settle the suit, which was to be distributed to about 23,000 former employees who did not elect COBRA coverage between 2018 and 2022.
Info: Settlement in Thompson v. Ryder Systems, Inc., 2/24/22.
Costco pays $750K to settle COBRA class action
Who was involved: Costco Wholesale Corp., a membership-based wholesaler, and a former employee who sued on behalf of himself and similarly situated current and former employees.
What happened: The class-action suit claimed the company violated the Consolidated Omnibus Budget Reconciliation Act by failing to properly notify approximately 40,000 current and former employees of their COBRA eligibility.
Result: The company paid $750,000 to settle the lawsuit. Of that:
- $250,000 has been allocated for attorneys’ fees
- $14,473.20 has been allocated for litigation costs, and
- $98,097 has been allocated for the costs of administering the settlement.
After all fees and costs have been paid from the settlement fund, the remainder will be distributed in the form of cash payments to class members.
Info: Settlement agreement in Baja v. Costco Wholesale Corp., 2/18/22.
Energy company pays $1M over missing COBRA notices
Who was involved: Brunel Energy, Inc., a Houston-based subsidiary of Brunel International, and three employees who sued on behalf of themselves and a class of similarly situated employees and former employees.
What happened: The class-action lawsuit alleged the company “failed to provide required notices of [the plaintiffs’] right to continued health care coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) and [their right] to premium reduction under the American Recovery and Reinvestment Act of 2009 (ARRA).” As to the COBRA claims, the suit alleged the company failed to provide proper notice of their right to elect COBRA coverage when they started participating in the plan and also failed to provide proper notice of their right to continue coverage after they were terminated.
Result: To settle the lawsuit, Brunel agreed to pay $1 million. Of that:
- $375,000 went to the class members to settle the COBRA and ARRA claims, and
- $624,999 covered attorneys’ fees and costs.
It was estimated that each class member received between $100 and $5,000, depending on the individual’s specific circumstances.
Info: Settlement in Slipchenko v. Brunel Energy, Inc., 1/23/15.
Key Takeaways
- When providing COBRA notices, plan administrators must use methods that are “reasonably calculated to ensure actual receipt” by beneficiaries.
- First-class mail is the preferred method for COBRA notices to qualified beneficiaries.
- Be sure that you have current mailing addresses.
- As an extra precaution, you may include a proof-of-mailing certificate with the notice.
- It may be difficult to prove hand delivery of notices to beneficiaries.
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