If you think that getting COBRA notices out on time isn't a big deal, this U.S. District Court opinion issued Tuesday should change your mind. Visteon was ordered to pay more than $1.8 million in penalties to a class of 741 former employees ($2,500 per former employee), plus attorneys' fees, because COBRA notices were not provided by the end of the maximum 44-day notice period following each former employee's termination date. Visteon's failure to maintain adequate internal systems for tracking employees' status, to maintain internal procedures for responding to COBRA inquiries, and to monitor its third-party COBRA administrators were some of the factors cited by the court for assessing the penalty.
Another important point to take away from this case is that Visteon was required to pay the penalties even though Visteon's third-party COBRA administrator was contractually responsible for sending the COBRA notices. Statutory liability for complying with the COBRA notice deadlines falls solely on the plan administrator (usually the employer), not on any third party engaged by the plan administrator; the plan administrator is responsible for monitoring those third parties. The opinion doesn't indicate if Visteon's third-party COBRA administrator was contractually required to indemnify Visteon for these penalties and any attorneys' fees awarded by the court. But if your business uses a third-party COBRA administrator, you should check your administrative services agreement to see if the third-party administrator is required to hold your business harmless for any penalties or other costs resulting from the third-party administrator's failures.