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Reversing a benefit decision made in error.


Guest HelpINeedSomeBody
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Guest HelpINeedSomeBody

Can anyone point me to authority for a plan administrator to reverse a benefit decision that was made in error. For example, where a COBRA disability extension was given to a participant when the individual was not determined to be disabled within the first 60 days of COBRA coverage.

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Guest HelpINeedSomeBody

Authority such as whether there are cases out there stating the ERISA estoppel principles prevent you from rescinding the offer. Or, hopefully cases saying that is perfectly permissible to do and that estoppel does not apply and it is the plan administrator's fiduciary duty to follow the terms of the plan. I am hoping to find something more along the later line of reasoning.

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Guest b2kates

it is unclear if the person is entitled to COBRA in any event.

when did they become disabled. Are you asking because 6 months into cobra coverage but before the expiration of cobra they became disabled.

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Guest HelpINeedSomeBody

A former Q & A on this site had the following to say:

A Q&A posted on October 13, 2000 in the Q&A: COBRA column on

> BenefitsLink.com.

> 10/13/2000 - http://benefitslink.com/modperl/qa.cgi?db=qa_COBRA&id=17

Does Error in Offering Disability Extension Obligate Employer?

A self-insured employer sends a COBRA notice to a qualified beneficiary

(QB) indicating that the QB is eligible for 18 months of COBRA coverage.

During the 18-month period, the employer realizes that it made a mistake

and qualified the QB for up to 29 months of COBRA coverage. Its records

mistakenly indicated that a Social Security disability determination had

been made and documented when, in fact, it had not been submitted. This

mistake was discovered when, during the first 18 months of COBRA

coverage, the employer changed to a fully insured plan and outsourced

the COBRA administration. The new COBRA administrator has identified the

error in communicating a COBRA extension to the affected QB. Does the

employer have to offer the extended COBRA coverage?

This scenario presents two issues that frequently occur. First,

employers often make mistakes in explaining COBRA rights to QBs. Second,

these mistakes are often identified by new COBRA administrators that

review existing files. Therefore, the question of what to do in these

circumstances is an important one.

The first point to understand is that a QB is only entitled, by law, to

COBRA coverage for up to 18 months due to a qualifying event that is a

termination of employment. A disabled QB is only entitled to an

extension of another 11 months (for up to 29 months total) if the QB

meets the requirements for a Social Security disability extension. (More

details at paragraph 1265 of Mandated Health Benefits--The COBRA Guide,

published by Thompson Publishing Group Inc.). If the QB does not meet

the technical requirements for a Social Security disability extension,

the QB is not legally entitled to that extension, regardless of what

might have been communicated by the employer.

A second point to consider is whether this general legal rule can be

overridden by estoppel principles. That is, circumstances exist under

which an employer's communication to a QB may lead the QB to act in a

certain way to his or her detriment. If that happens, a court may find

that the employer is "estopped"-- that is, barred-- from denying the

COBRA extension.

Regarding your situation, a strong case does not appear to exist in

favor of applying estoppel principles. The mistake was identified during

the original 18 months of COBRA coverage before the QB could have relied

on that mistaken statement.

Nevertheless, this question points out how important it is to monitor

COBRA administrative procedures. If errors like this one are caught

during changes in COBRA administrators, it is likely that they are also

occurring before the change in administration happens. Therefore,

employers and plan administrators should periodically review their COBRA

administration to make sure that misstatements and common mistakes are

not happening.

October 13, 2000

Does anyone think if the employer has communicated the mistaken extension to the employee, that estoppel would likely apply?

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You have two options which you need to review with counsel:

1. notify the employee that the extension perod was made in error and that correct period is 18 months.

2. do nothing and cover the employee for 29 months.

Why not try the path of least resistance and select option 1 to see what the employee does. If ther is no objection then its the end of story. If the employee objects then back down and allow the coverage to continue for 29 months.

mjb

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