Consolidated Omnibus Budget Reconciliation Act (COBRA) compliance often gets treated as a “set it and forget it” administrative task, particularly when employers outsource to third-party administrators. But the legal obligation to provide compliant COBRA notices ultimately rests with the plan administrator, not the COBRA vendor. That makes periodic reviews of COBRA notices essential. A deficient notice is not just a technical error; it can expose the plan (and employer) to statutory penalties, litigation costs, and participant claims.
In practice, we routinely see COBRA notices that do not fully comply with COBRA, even when prepared by experienced vendors. Common issues include vague or incomplete election instructions, no reference to the name of the plan, missing deadlines, or unclear premium information. These deficiencies are often discovered only after a participant challenges the notice, at which point it is too late to correct the problem without consequences.
Recent experience underscores this point. Not long ago, when reviewing a vendor-prepared election notice, we identified several fundamental omissions, including the failure to identify the plan by name, the absence of the plan administrator’s name, and incomplete payment terms. These are not minor drafting issues. They go to the core of whether the notice effectively informs the qualified beneficiary of their rights and obligations under COBRA.
The DOL has issued a model notice. Plans are not required to use the model notice, but their notices are required to include the following:
- The name of the plan and the name, address, and contact information of the plan administrator;
- Identification of the qualifying event and the qualified beneficiaries;
- An explanation of the independent right to elect continuation coverage;
- A description of the COBRA coverage and when it will begin if elected;
- The procedures and deadline for making an election;
- The length of coverage available and how it may be extended;
- How to give notice of a second qualifying event or disability determination;
- The amount of premiums, how they are calculated, and when and how payments must be made;
- The consequences of failing to elect or make timely payments;
- An explanation of the importance of keeping their address current; and
- A statement on where to receive complete information.
Failing to include required information can render the notice deficient, even if the omission seems technical. Courts generally focus on whether the notice is written in a manner calculated to be understood by the average plan participant and whether it meaningfully conveys the required information. Simply relying on a vendor or assuming a template is sufficient will not shield a plan administrator from liability.
The consequences of providing a deficient COBRA notice can be significant. Courts have the discretion to impose excise taxes and statutory penalties of up to $110 per day per qualified beneficiary, along with attorneys’ fees. Regularly reviewing COBRA notices and holding vendors accountable for providing non-compliant notices is a relatively low-cost step that can avoid substantial exposure down the road.
If you have questions or need assistance reviewing your COBRA notices, please reach out to any member of our employee benefits team.
