Guest Article

From Mandated Health Benefits--The COBRA Guide, published by Thompson Publishing Group, Inc.

Proving COBRA Notices and Elections Were Sent on Time When Mail Disruptions Strain COBRA Administration

(Nov. 14, 2001) The latest threats of biological contamination in the U.S. mail system have severely disrupted all aspects of employee benefit plan administration. In some cases, the U.S. Postal Service is very carefully screening first class mail before it is routed for postmark and delivery. In many cases, the delay involved between sending a letter and the date it reaches its intended recipient has stretched from days to weeks.

These disruptions are particularly troublesome when it comes to accurate COBRA administration. COBRA enacted a series of technical and time-sensitive notice and election requirements that plan administrators and qualified beneficiaries must thoroughly understand and implement. Through this statutory notice structure, qualified beneficiaries are notified of their rights and responsibilities and can protect their rights to continued health coverage. The system, as it has developed over the years, depends in large part on the use of the U.S. postal system.

Historically, COBRA's administrative presumptions have worked fairly well and the following rules generally are followed.

Recent Disruptions Affect These Presumptions

Given the problems that can occur when a COBRA system depends on the postal service and that service is disrupted, plan administrators must consider other procedures.

They should retain clear proof that COBRA notices and election forms were mailed on time. In some instances, plan administrators may want to consider alternative means of delivery (and retain proof of those delivery means).

For example, hand delivery of COBRA notices is satisfactory from a legal perspective regarding the qualified beneficiary to whom the notice is delivered. It is not satisfactory proof of notice to any other affected qualified beneficiaries, however. Similarly, it may be possible to deliver COBRA notices by facsimile or electronic means in addition to written notices sent by regular mail. Or administrators may wish to use certified mail or other delivery means that are not subject to the same disruption as regular first class mail.

What if the administrator claims that it never received a COBRA election form? Will the presumption of receipt overcome the administrator's protestations to the contrary? In one recent ERISA case, a plan administrator claimed that it did not receive a plan participant's distribution election form. Therefore, it did not implement the requested distribution. In the case, Schikore v. BankAmerica Supplemental Retirement Plan, 2001 WL 1222395 (9th Cir., Oct. 16, 2001), the 9th U.S. Circuit Court of Appeals stated that in the absence of a "mailbox rule" presumption, plan administrators would be arbitrarily deciding whether a participant acted in a timely manner. Applying the rule to plan participants was, in the court's view, entirely consistent with ERISA's purpose.

Therefore, once the participant presented evidence of mailing, even though it was just a sworn declaration that she mailed the election form on time, the burden shifted to the plan administrator, which based its defense solely on the fact that the form was not found in its records. This was not enough, in the court's view, to overcome the participant's presumption. As the court indicated, the mailbox rule is an important employee protection under ERISA. Employees must often make crucial decisions about their rights, and applying the mailbox rule will, according to the court, guarantee that if the plan claims not to have received an election form, the document will still be presumed to have been received by the plan unless it provides "probative evidence" of non-receipt.

This holding is significant because it provides an excellent example of how a court could review a plan administrator's claim of non-receipt of a COBRA notice due to the recent mail disruptions. In light of these recent disruptions, plan administrators should review their mail handling procedures to ensure that they can document all of the appropriate steps in their COBRA notice and election administration.

Excerpted from the December 2001 supplement to Mandated Health Benefits -- The COBRA Guide, ©Thompson Publishing Group, Inc., 2001. All rights reserved.

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