ERISA Plan Administrator Duties and COBRA Notification Rules

Under COBRA, the plan administrator is the person on the hook for getting notices out on time and getting their contents right. A missed or defective notice can trigger an ERISA court penalty of up to $110 per day, a separate IRS excise tax of $100 per day for each affected beneficiary, and personal liability for medical costs the beneficiary would otherwise have had covered. The COBRA notice requirements for plan administrators break down into four separate notices, three different deadlines, and a set of content and delivery rules that courts read strictly.¹

The Four Notices You Are Responsible For

A plan administrator has to send four distinct notices over the life of a participant’s coverage.

The general notice goes to every employee and their spouse when they first become covered under the group health plan. It explains COBRA rights, the qualifying events that can trigger continuation coverage, who has to notify the plan when those events occur, and how premiums work. It is the reference document beneficiaries will need later, so it has to be delivered before anything happens, not after.²

The election notice is the one that carries the most legal exposure. After a qualifying event, the administrator sends this to every qualified beneficiary explaining what happened, what coverage is available, how to elect, and what it will cost.

The early termination notice goes out when COBRA coverage ends before the maximum period, whether because the beneficiary picked up other group coverage, became entitled to Medicare, stopped paying premiums, or the employer dropped the plan. The regulation requires this notice “as soon as practicable” after the decision. Administrators forget this one often, and the liability exposure is the same as a missed election notice.³

A fourth situation, the notice of unavailability, comes up when someone requests COBRA and the administrator determines they are not entitled to it. The determination has to be communicated, not left unanswered.

The Deadlines and the Notification Chain

Three separate clocks run in sequence, and confusing them is one of the most common compliance failures.

For qualifying events the employer sees directly (termination, hours reduction, death of the employee, the employee’s Medicare entitlement, and employer bankruptcy), the employer has 30 days from the event to notify the plan administrator.⁴

For events the employer would not necessarily know about — divorce, legal separation, or a child losing dependent status — the covered employee or qualified beneficiary is the one who has to notify the plan administrator. The plan can set its own deadline for this notice, but it cannot be shorter than 60 days, measured from the later of the event itself, the date coverage would be lost, or the date the beneficiary was informed of their duty to notify.⁵

Once the administrator is on notice of any qualifying event, the election notice has to go out within 14 days to every qualified beneficiary. Multiemployer plans can set a longer period in the plan documents, but for single-employer plans, 14 days is hard.⁴

The beneficiary then gets at least 60 days to decide whether to elect, counted from the later of the notice date or the date coverage would otherwise end.⁶

What the Election Notice Must Contain

A notice sent on time but missing required content can still trigger penalties. At minimum, the election notice has to identify:

The name of the health plan and contact information for the person or office handling COBRA
The qualifying event and the date coverage will end
Every person who qualifies as a beneficiary by name
How to elect coverage, where to send the election, and the deadline for doing so
The premium amount and when payments are due
The maximum coverage period available, including any extensions that could apply
What happens if the beneficiary does nothing

The notice should also point beneficiaries toward alternatives, including Health Insurance Marketplace coverage. Loss of employer-sponsored coverage triggers a 60-day special enrollment window, and premium tax credits will make Marketplace coverage cheaper than COBRA for many people.⁵

The Department of Labor publishes model election notices. Completing a model accurately is treated as satisfying the content requirements, which makes the models the safest starting point for anyone who wants to avoid content-based challenges.⁷

Getting the Coverage Period Right

The maximum coverage period stated in the notice has to match the qualifying event. Getting it wrong creates its own exposure.

Termination and reduction in hours carry an 18-month maximum. Every other qualifying event — death of the covered employee, divorce or legal separation, the employee’s Medicare entitlement, or a child’s loss of dependent status — carries a 36-month maximum for the affected beneficiaries. Employer bankruptcy allows retirees and their dependents to continue coverage, in some cases until death.⁸⁹

Two extensions can lengthen an 18-month period. If a qualified beneficiary is determined by the Social Security Administration to have been disabled at some point during the first 60 days of COBRA coverage, the period stretches to 29 months. The beneficiary has to notify the administrator of the SSA determination, and the plan can require that notice within 60 days of the determination or the start of COBRA, whichever is later. For those 11 extra months, the plan may charge up to 150% of the full premium instead of the usual 102%.¹⁰

A second qualifying event during an existing 18-month period can extend the total to 36 months from the original event. The second event has to be one that would have independently caused a loss of coverage had the first never happened: death, divorce or legal separation, the employee’s Medicare entitlement, or a child aging out.⁵

How to Deliver the Notice

Delivery is where compliance most often falls apart, because the administrator carries the full burden of proving the notice was sent. Courts have rejected general testimony about office mailing procedures when there is no record tied to the specific notice.

First-class mail to the beneficiary’s last known address generally satisfies federal requirements. Certified mail adds a delivery receipt, and given that the administrator has to prove sending, that receipt is worth the small extra cost.

Electronic delivery is allowed, but the recipient must either have regular access to the electronic system as part of their job duties or affirmatively consent to receiving documents that way, and the administrator has to take reasonable steps to confirm actual receipt. A recently terminated employee whose company email has been shut off is not a candidate for electronic-only delivery.

One easy trap: a notice handed to the covered employee at work does not automatically reach a spouse or children who are separately qualified beneficiaries. A single notice mailed to the shared home address does count as notice to everyone at that address, but only if they actually live together.⁴

What a Violation Costs

Two penalty regimes stack.

Under ERISA, a court can impose up to $110 per day for each day a required notice is late, applied per violation. When multiple beneficiaries were affected by the same missed notice, the daily amounts compound. The DOL has confirmed this court-assessed penalty is not adjusted for inflation under the Federal Civil Penalties Inflation Adjustment Act.¹¹

The IRS separately imposes an excise tax of $100 per day for each affected beneficiary during the period of noncompliance, with a $200 daily cap when multiple beneficiaries are affected by the same qualifying event.¹²

Beneficiaries can also sue for the medical costs they would have had covered, plus attorneys’ fees and other equitable relief. In practice the fees often exceed the statutory penalties.

And the administrator’s personal exposure runs deeper than COBRA itself. A plan administrator is an ERISA fiduciary, held to a duty of loyalty and a prudent-person standard, and can be ordered personally to restore any losses the plan suffers from a breach, disgorge any improper profits, and in serious cases be removed from the role.¹³¹⁴

Records That Actually Protect You

Because the administrator has to prove sending, documentation is where cases are won or lost. What holds up:

Certificates of mailing from the post office showing the beneficiary’s name and address
Certified mail receipts and tracking confirmations
Delivery and receipt confirmations for any electronic delivery
A copy of the actual notice sent to each specific person
A log for each qualifying event showing the event date, the date the administrator was notified, and the date each notice went out

Hold these for at least six years. The statute of limitations for a fiduciary breach claim runs six years from the last act that was part of the breach, or three years from when the plaintiff actually learned of it, whichever is earlier. In cases involving fraud or concealment, the six-year clock instead runs from discovery.¹⁵

The gap between “we always send these on time” and “here is the certificate of mailing for this specific notice to this specific person on this date” is often the gap between defending the case and paying it.

1
U.S. Department of Labor. Continuation of Health Coverage (COBRA)
2
eCFR. 29 CFR 2590.606-1 – General Notice of Continuation Coverage
3
U.S. Department of Labor. Health Benefits Advisor for Employers – Early Termination
4
Office of the Law Revision Counsel. 29 USC 1166 – Notice Requirements
5
U.S. Department of Labor. FAQs on COBRA Continuation Health Coverage for Workers
6
Centers for Medicare & Medicaid Services. COBRA Continuation Coverage Questions and Answers
7
U.S. Department of Labor. FAQs About COBRA Model Notices
8
Office of the Law Revision Counsel. 29 USC 1162 – Continuation Coverage
9
Office of the Law Revision Counsel. 29 USC 1163 – Qualifying Event
10
U.S. Department of Labor. Health Benefits Advisor – Disability Extension
11
U.S. Department of Labor. Fact Sheet – Adjusting ERISA Civil Monetary Penalties for Inflation
12
Office of the Law Revision Counsel. 26 USC 4980B – Failure to Satisfy Continuation Coverage Requirements of Group Health Plans
13
Office of the Law Revision Counsel. 29 USC 1104 – Fiduciary Duties
14
Office of the Law Revision Counsel. 29 USC 1109 – Liability for Breach of Fiduciary Responsibility
15
Office of the Law Revision Counsel. 29 USC 1113 – Limitation of Actions