COBRA Notice not Due to Employee Who Failed to Pay Health Premiums

December 21, 2007 (PLANSPONSOR.com) - The 6th U.S. Circuit Court of Appeals has agreed with a lower court ruling that a former Tyson Foods employee was not entitled to notification under the Consolidated Omnibus Budget Reconciliation Act (COBRA) because he failed to pay his health care plan premiums while on medical leave prior to his termination.

The appellate court said Tyson’s retroactive discontinuation of Jason Jordan’s coverage because his payments to his former health care plan were in arrears was consistent with the written policies of both the former employer’s plan and the Tyson Plan (Tyson acquiredJordan’s former employer while Jordan was out on medical leave).  Those plans stated that coverage would be discontinued for employees who fail to pay their premiums.

Jordan claimed the arrears were the responsibility of his employer, because it failed to send the coupon book typically sent to employees on leave – that outlined the payment duties – to his correct address. However, the court determined that Jordan had at least constructive notice of his duty to pay his health care premiums while on leave, since it was noted in his former employer plan’s Summary Plan Description (SPD).

The court noted that the Family and Medical Leave Act (FMLA) requires employers to maintain health care coverage for employees while they are on an FMLA leave of absence but that obligation ceases when an employee fails to return to work after FMLA leave or continues on leave after FMLA-eligible leave expires – which Jordan did.

No Qualifying Event

In addition, the court noted that a qualifying event under COBRA occurs at a participant’s termination only if the termination would cause a loss of coverage.  Instead, as a result of Jordan’s failure to pay those premiums, he lost his coverage prior to his termination. “Because no qualifying event occurred, Tyson had no duty to provide COBRA continuation notice,” the court ruled.

Jordan was granted a leave of absence due to emotional problems. During his leave the packet usually sent by his employer with coupons for continuing to pay premiums for the company’s health care plan and short-term disability plan were sent to a prior address and not Jordan’s current address.

While on leave Tyson acquired Jordan’s former employer, and it only allowed employees who were current on their prior plan’s premiums to enroll in the Tyson plans. Tyson took a premium payment for its plan from one of Jordan’s short-term disability checks, but cancelled his coverage when it realized payments related to his former employer’s plans were in arrears.

Jordan ‘s attorney attempted to have his benefits restored, and Tyson informed him of the amount Jordan would have to pay for restoration. However, Jordan was fired soon after that because he failed to return to work when his leave was up. He expressed an intent to continue health care coverage under COBRA, but failed to pay required premium payments within the required 45-day period.

The opinion in Jordan v. Tyson Foods is here .

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