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September 2016


No COBRA Claim for Same Sex Spouse

In an unpublished opinion, the 3rd Circuit U.S. Court of Appeals chose to affirm the prior rejection by a lower court on ERISA claims by a same sex spouse. This case, Sacchi v. Lucian, 2016 WL 3249761 (3rd. Cir. June 13, 2016) originated prior to the U.S. Supreme Court’s decision to legalize same sex marriage nationwide. The facts are as follows:

Stephen J. Simoni was an employee of Meridian Health Systems, Inc. Simoni was covered by his employer’s group health plan; however, he did not elect coverage for his same sex spouse John Sacchi. Simoni was terminated from Meridian on Oct 18, 2010 and approximately a year later, Sacchi suffered a stroke. Sacchi alleged that neither he nor Simoni had received a COBRA election notice. Furthermore he claimed that through their legal counsel in Dec 2011 they requested the election notice from Meridian, however were ignored.

Ceridian Benefits Services, Inc. – Meridians third-party administrator, sent a COBRA notice to Simoni and “his eligible dependents” in early 2012, which informed Simoni he was entitled to COBRA coverage effective Nov 10, 2010. Sacchi contended that at that time, Simoni specifically requested open enrollment forms in order to enroll Sacchi as his benefits-eligible spouse for 2011 and 2012, with a termination date of April 30, 2012. Sacchi claimed that the fact that Meridian at first only sent forms for single coverage, was a blatant move to keep him from being added. However, when Meridian finally sent the open enrollment forms, Simoni never returned them.

Simoni then filed suit against Meridian, its plan and a company official, as well as the TPA for COBRA notice violations. Additionally, Simoni moved to have Sacchi added as a plaintiff, however the court rejected his motion because Sacchi did not have standing to sue under ERISA. Simoni therefore turned around and filed suit against the same defendants in state court and that case was sent to federal court based on ERISA preemption. The lower court determined that ERISA does not allow an individual to sue merely because they “could” be an eligible beneficiary. Without having been enrolled by the plan participant in the first place, they have no standing. Sacchi appealed, however in the end, the 3rd Circuit agreed with the Lower Court’s decision.

In this author’s opinion, this case is a reminder that the term “spouse” applies to both same and opposite sex spouses now that the U.S. Supreme Court has made it’s decision. However, in this case, it wasn’t about whether the employer discriminated against a same sex spouse – it was about a failure on the part of a plan participant to properly enroll the spouse in the first place.

Mistakes Happen

Plan administrators and employers should be prepared to face the prospect of handling errors in the context of COBRA compliance. Let’s face it – mistakes do happen. Analyzing common errors and their possible corrections ahead of time in order to minimize exposure to damages and penalties can prove to be a smart move. Considering the fact that penalties for COBRA errors are regularly imposed by courts, it would be wise to take a look at some common violations and their possible remedies.

Failure to provide timely COBRA notices is probably the most common error made by plan administrators and employers. If the failure involves the initial notice, the violation can usually be “undone” to the best possible degree by immediately sending the notice to the affected individuals. However, it can be more complicated than that. Remember, an employer has 30 days to notify the plan administrator of a qualifying event. At that point the plan administrator must send the election notice to the covered employee, spouse and dependents within 14 days of receiving the employer's notification. If the employer and plan administrator are the same, there is a combined 44-day timeline to distribute the election notice. So in the case that an employer failed to notify the plan administrator of a divorce, for example, because he/she did not receive the initial notice on time, what would be an appropriate remedy? At the very least, sending out the initial notice even if it is late would be a good start.

Another notorious error often made involves misstated premium amounts. If the premium payment was initially quoted too low, it may be prudent to either leave it alone for the duration, or ask for the difference going forward. Asking for the back payments retroactively could be asking for trouble. But what if the payment amount quoted was too high? It could be argued that because of this error, an individual chose not to elect COBRA and was thereby harmed. In order to remedy this situation it would seem wise to refund the difference to those individuals that have paid too much, but perhaps more importantly, re-notify those who did elect. Working out additional timeframes for the latter to pay the retroactive premiums would probably be advisable as well.

Once an error is identified, it is of utmost importance to respond quickly and fairly. From a legal standpoint, making an individual “whole again” is often the key. In other words, if the individuals were not necessarily harmed by the violation and remain in the same position they would have been in had the error not occurred, the legal repercussions may be mitigated. Courts realize that the Employee Retirement Income Security Act of 1974 is quite complex; therefore, they can take into account whether an honest mistake should justify imposing penalties, as well as whether the plan administrator took proper action to rectify the situation once the error was caught. In this author’s opinion, implementing steps to make sure errors do not occur in the first place goes without saying, Be proactive by reviewing your COBRA administrative processes regularly and make sure proper training is updated to ensure compliance. However, because it is human to err, acting in good faith to rectify errors once they are found, is the best defense.


In this Issue:

No COBRA Claim for Same Sex Spouse

Mistakes Happen

See Also:

COBRA Solutions
Cafeteria Plan Manager
Employee Database Manager
COBRA Administration Manager
U.S. Department of Labor
COBRA and the Trade Act of 2002
COBRA and Medicare Entitlement

Technical Information
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