Riddle v. Pepsico, Inc., 2020 WL 883119 (S.D.N.Y. 2020)
A federal court has refused to dismiss a class action lawsuit alleging that a large food and beverage company provided deficient COBRA election notices to employees losing coverage under its group health plan. A former employee and his spouse claimed that the company provided two separate letters regarding COBRA enrollment that, together, provided some—but not all—information required by the COBRA regulations. Specifically, the employee alleged that the notices failed to provide the names and addresses of the plan administrator and COBRA administrator and did not include election procedures or an election form. The employee further alleged that the notice deficiencies prevented him and his spouse from making an informed decision about health coverage, resulting in a loss of coverage and out-of-pocket medical expenses. The company asked the court to dismiss the case, arguing that its notices satisfied the content requirements, and that, even if they were deficient, the company should not be liable because it made a good faith effort to comply.
Admitting that it was a “close call,” the court allowed the lawsuit to proceed based on four factors. First, the company’s use of multiple notices, rather than a single notice, may not comply with the regulations’ call for “a notice” meeting COBRA’s content requirements. Second, other courts have found that the omission of contact information for the plan administrator and COBRA administrator violates the notice requirements. Third, provision of a website and phone number in lieu of an actual enrollment form may not comply. And fourth, the letters did not include an address for payment of premiums, as required by the regulations. The court further found no clear authority that a good faith defense is available.
EBIA Comment: The employees represented in this class action—as well as the company—have a long road ahead of them, and it will be interesting to follow the case’s progress. In the meantime, employers should take steps to avoid similar litigation. The DOL’s COBRA regulations require that the election notice be written in a manner calculated to be understood by the average plan participant and provide a detailed list of 14 items that must be included in the notice. The election notice is sometimes called the election packet because it typically consists of (1) a cover letter explaining the qualified beneficiary’s COBRA rights and obligations, as well as election, payment, and notice deadlines; (2) an election form; and (3) a premium schedule. Employers should carefully review their entire election packet to make sure it includes the required elements. For more information, see EBIA’s COBRA manual at Sections XVIII.D (“What Information Must the Election Notice Contain?”) and III.B.4 (“Good Faith Compliance Standard”). You may also be interested in our webinar “Learning the Ropes: An Introduction to COBRA Continuation Coverage” (recorded 7/31/2019).
Contributing Editors: EBIA Staff.