Employer not Liable for COBRA Notice Failure

January 28, 2011 (PLANSPONSOR.com) – A federal court has determined that an employer was not responsible for providing a COBRA election notice to a former employee when a third-party administrator was the employer’s independent COBRA plan administrator.

EBIA reports that the U.S. District Court for the District of South Dakota concluded that if an employer uses an outside plan administrator, responsibility for COBRA notification is bifurcated: The employer must notify the plan administrator when a qualifying event occurs, and the plan administrator must provide the election notice to the qualified beneficiary.   

The court rejected the employee’s claim that the employer had a duty to oversee the plan administrator or follow up with the plan administrator to ensure receipt.   

According to EBIA, the employee had returned to work after active military duty and then taken a leave of absence under the Family and Medical Leave Act (FMLA). After the employee resigned while on FMLA leave, the employer’s independent COBRA plan administrator mailed his COBRA election notice to the post office box that he had maintained while on active duty.   

Because the employee no longer maintained the post office box, he did not receive the COBRA notice. The employee claimed that the employer was aware of his new address and was obligated to ensure that the COBRA administrator sent the election notice to the correct address.