Employers See Increasing Numbers of Lawsuits Over Deficient COBRA Notices

Why Are Employers Struggling With COBRA Notice Requirements?

 

In 2020, the U.S. Department of Labor (DOL) revised its model COBRA election notice. While employers can simply use the DOL’s model COBRA notice, many do not rely on it because most use third-party vendors to provide notices to their former employees.

 

These third-party vendors typically provide their own notices that do not strictly adhere to the DOL’s model notice. For instance, vendors often omit the plan administrator’s name to avoid confusion—as former employees mail COBRA coverage payments to the vendor, not the plan administrator. Additionally, not all information required by the DOL’s model notice is known to employers at the time they must provide notice, so vendors omit it. Even though vendors prepare and send most notices, COBRA notice litigation is directed at the employer or plan sponsor, not the vendors.

What This Means

 

While ensuring compliance is always challenging, recent developments—such as the DOL’s revised model notice and the IRS and DOL extending COBRA deadlines and providing additional guidance following the enactment of the American Rescue Plan Act of 2021—have made it harder for employers. Consequently, COBRA notice litigation is likely to continue for the foreseeable future. While the recent rise in COBRA notice litigation has targeted mainly large employers, all employers should consider reviewing their COBRA notices to ensure compliance, identify potential liabilities and avoid litigation.