EBIA Weekly Newsletter

Court Allows Lawsuit Against TPA for COBRA Notice Violation

   March 3, 2016

Borovac v. Nat’l R.R. Passenger Corp., 2016 WL 697101 (D. Neb. 2016)

A former employee sued his employer for failing to provide a COBRA election notice and later sought to add the employer’s third-party administrator (TPA) to the lawsuit. The employee alleged that the employer did not timely notify the TPA of his qualifying event and that the TPA, in turn, failed to direct a second administration company to provide an election notice. The employer argued that the TPA should not be added because the TPA was not the plan administrator within the meaning of ERISA and COBRA. The employee countered that the TPA functioned as an administrator and was referred to as an administrator by the employer.

The court allowed the employee to include the TPA in the lawsuit, observing that neither the employer nor the employee had presented a plan document designating a plan administrator and explaining that the court could not ascertain the parties’ roles and actions so that an administrator could be identified. The court noted that some courts have recognized the existence of a “de facto administrator”—a party different than the plan’s named administrator that may nevertheless be considered plan administrator based on actions alone—and concluded that the employee had alleged sufficient facts to support a COBRA claim against the TPA.

EBIA Comment: Many plans contract with TPAs to provide COBRA election notices to qualified beneficiaries, but TPAs rarely agree to become the designated plan administrator. The TPA in this case will undoubtedly challenge the court’s preliminary ruling. It will likely point to the COBRA statute itself, which provides that the administrator is the person designated for that role in the plan document and that, if no person is designated, the administrator is the plan sponsor (generally the employer). Employers contracting with TPAs for COBRA services should be aware that in most cases, the employer—not the TPA—is the official plan administrator with the ultimate liability for COBRA compliance. For more information, see EBIA’s COBRA manual at Section XVIII.C (“Plan Administrator Must Provide Election Notice and Notice of Unavailability”) and EBIA’s ERISA Compliance manual at Section XXIX.B (“Who Is the ERISA Plan Administrator?”).

Contributing Editors: EBIA Staff.