COBRA Issue - Long

[Guest aswolff]

8 companies merged into one new company almost 9 months ago. Each of the former entities continued to operate their insurance plans while we rolled up the 8 companies. It was decided that the new organization would engage a PEO to hande our benefits and payroll administration since there was no infrastructure at the new corporate level at all (finances being managed by Excel and Quickbooks - $20m/year company - need I say more?) All insurance plans were to termiante 4/30 and all would go live with the PEO benefits on 5/1. Employee meetings were held 4/9-16 and at that time notices were sent to the insurance companies regarding plan termination. One insurance company required 60 days notice for termination therefore they could not terminate the plan until 5/31 and they were "working with us." There was one former employee enrolled in COBRA under this plan. The PEO sent COBRA paperwork reflecting a 5/1 start date that the person returned effectively enrolling them inthe new plan with the PEO. They had paid their premium for May to the former company and then requested a refund for their May premium so they could pay it to the PEO. THe former insurance company denied the request and they are now asking for the PEO to begin their COBRA coverage on 6/1 or for us (the employer) to pay their May premium.

I am at a loss. I think we may have mishandled the employee communication aspect but I don't know that we actually broke any law that would cause serious issue with the DOL.

I do fear that we had an obligation to officially notify this former employee of the termination of her original COBRA plan as soon as we became aware the plan would terminate. (I found out 4/7 that I would be implementing these new benefits and payroll relationship beginning 4/9 at the same time we were reducing headcount from 180 to 85.) I failed to do so. The COBRA coverage she had under the prior company was not sponsored by the merged company but was sponsored by the prior employer which effectively no longer existed (the asset purchase agreement bought all the assets of hte company) so it wasn't even on my radar at the time. The employee feels that the new company made a poor decision that affected her personally and that we must "make it right or face the consequences." I say it is bad timing and while we may be guilty of making poor decisions on bad timeframes, we did not break any law.

She has threatened to go to the DOL which is not on my top 10 hottest issues at the moment. Anything I should be prepared for or know? I want to make sure senior managemetn is fully aware of the potential exposure but am not sure I know myself!

Any advice, comments, thoughts, etc.?

[leevena]

Your post was a little long and confusing, so let me make sure that I understand the facts.

The employee (cobra) was covered under the plan terminating on 5/31. The cobra participant paid the May premium. The PEO sent them a form enrolling them for 5/1.

Why did the PEO enroll the person for 5/1 when the old carrier was covering them till 5/31? As to whether the carrier can decline to refund the money...who cares (my opinion)? My recommendation is for the company and/or PEO to pay the cobra participant the amount and make sure that the new plan has accepted them.

All things considered, this is a small price to pay to avoid some headaches.

[Guest aswolff]

COBRA terminated on 5/31 becaue the prior carrier required 60 days notice and we did not get 60 days notice from the consultants that made the decision to move to the PEO. The PEO went active 5/1 and contractually we were required to pay their premiums beginning 5/1.

In the end, the group of employees in the group were carved out of hte agreement and their benefits became effective 6/1/08 which aleviated the problem

The restructuring group that has control of cash refused to pay the one month COBRA so I was hoping to make them aware of potential issues their decision would cause.

Sorry the email was so confusing and unclear. Next time I'll get some sleep first...it had been a long day. THanks for hte reply!

[leevena]

It seems like your question is still about the money the person wants, so my suggestion would be to pay it and get it over with.