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December 6, 2012

COBRA Still Lurks – Attention is Warranted

The COBRA law continues to be fertile ground for litigation.  Two recent cases bear mentioning.

In the Evans v. Books-A-Million case (CV-07-S-2172-S, N.D. Ala., Oct. 29, 2012), the U. S. District Court for the Northern District of Alabama imposed a significant penalty ($37,950) on the employer/plan sponsor for failure to timely provide COBRA notices.  In addition, the Court granted an $87,300 award in attorney’s fees.  In its determination, the Court said that the employer willfully failed to provide the requisite COBRA notices. 

In another case, a Court cautions about an inadvertent commitment.  At issue was the small employer exception to COBRA.  Generally, COBRA applies to employers employing 20 or more employees on at least 50 percent of the business days in the preceding calendar year.   In Hanysh v. Buckeye Extrusion Dies, Inc. (2012 WL 3852569 (N.D. Ohio, Sept. 5, 2012), the employer, who fell below the 20 employee threshold, nevertheless, offered COBRA to its employees. A year later when this error was discovered, the employer tried to terminate COBRA coverage and refund the premium to the employee.  The individual claimed, and the U. S. District Court for Northern District of Ohio determined, that the employer, by its action of offering COBRA, was obligated to continue providing for it. 

These cases remind us of the importance of doing due diligence in COBRA compliance, including, as is illustrated in the Hanysh case, being careful not to commit to something unless you are prepared to honor it.

 

The information contained in this Benefit Beat is not intended to be legal, accounting, or other professional advice, nor are these comments directed to specific situations.

As required by U.S. Treasury rules, we inform you that, unless expressly stated otherwise, any U.S. federal tax advice contained in this Benefit Beat is not intended or written to be used, and cannot be used, by any person for the purpose of avoiding any penalties that may be imposed by the Internal Revenue Service.

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