Consider a situation in which a former employee alleges that he or she did not receive a COBRA election notice. That’s the notice that must be provided to group health plan participants when they lose coverage as a result of certain events, including termination of employment, and that gives the participants information regarding their rights and obligations to elect COBRA continuation coverage. If a court finds that the employer failed to provide the notice, the court could (1) allow the employee to retroactively elect coverage after the election period otherwise would have ended, (2) award statutory penalties of up to $110 per day to the employee, or (3) provide other relief to the employee. There is also an excise tax for COBRA failures, including failure to provide a COBRA election notice, of $100 per day per failure. An employer must report the excise tax on Form 8928, and the statute of limitations generally would not start running unless and until the employer does so.

To prevail at the summary judgment stage and avoid a trial, some courts hold that the plan administrator has the burden of proving that the election notice was properly sent to the employee. So, what evidence does the plan administrator need to establish that the notice was sent? According to a recent decision, a declaration of the employer’s normal business practices may not be enough to win a motion for summary judgment.

Recently, in Randolph v. East Baton Rouge Parish School Board, No. 15-654-SDD-EWD, 2019 WL 6255489 (M.D. La. Nov. 22, 2019), the court denied a motion for summary judgment made by the East Baton Rouge Parish School Board relating to whether a COBRA election notice had been timely sent to a former School Board employee. The former employee claimed that she never received a COBRA election notice in connection with her loss of coverage following her termination of employment. The School Board’s Supervisor of Payroll and Benefits declared under oath that (1) election notices are automatically generated and mailed when a School Board employee terminates employment, and (2) there is no reason to believe the ordinary process was not completed in the case of this former employee. The court noted that the School Board did not submit a copy of the letter that was mailed to the former employee or any documentary support for its declaration. Accordingly, the court held that the declaration of business practices was insufficient to demonstrate, on summary judgment, that the School Board delivered the notice.

To be defend against claims of a failure to provide COBRA election notices, plan administrators should be able to show that they mailed the notice using a method that was reasonably calculated to be received by the former employee and provide evidence of what was mailed. Retaining adequate proof can not only defeat a claim but also end the litigation earlier at the summary judgement stage, saving the company time and money.

Plan administrators may be required to prove mailing years after the fact. ERISA expressly requires retention of records for certain purposes:

  • ERISA § 107 requires retention of records for purposes of substantiating information reported on Form 5500 and related documents for at least six years after the Form 5500 or related documents are filed (or would have been filed but for an exemption).
  • ERISA § 209 requires indefinite retention of records sufficient to determine benefits due to employees. (It does not apply to health and welfare plans.)

While the COBRA election notice records may not be subject to these ERISA retention requirements, they might be a good benchmark. In addition, employers should keep in mind that the IRS recommends retaining records until the applicable statute of limitations has run. As noted above, the statute of limitations for the excise tax on COBRA failures generally does not begin to run until Form 8928 is filed.

Plan administrators should work with legal counsel to shape record retention policies or negotiate record retention arrangements with service providers to be in a position to swiftly defeat claims of failure to provide COBRA election notices and to avoid ending up in a situation similar to the School Board’s in Randolph.