Recently, a federal district court held Visteon, the employer and administrator of the company's group health plan, liable for $1.8 million because it failed to monitor its third-party COBRA administrator, who failed to provide hundreds of terminated employees with COBRA election notices. Pierce v. Visteon Corp., 2013 WL3225832 (S.D. Ind. 2013).
Visteon, as the group health plan administrator, used separate third-party administrators (TPA) for payroll, benefits and COBRA administration. When an employee was terminated, a local human resources official entered that information into a timekeeping system. The information was then automatically passed electronically from TPA to TPA, each of whom was tasked with various elements of the termination process. Neither the local HR official nor the TPA reported terminations to Visteon, and the COBRA TPA did not report when COBRA election notices had been sent.
Visteon argued that whether the COBRA election notices were sent was out of its control and thus it could not be held liable for statutory damages. The court disagreed, ruling that Visteon had either willfully violated COBRA notification provisions, or was willfully negligent in its duties as plan administrator. The court specifically noted that the $1.8 million fine should act as a deterrent to other large employers using a TPA to meet statutory COBRA obligations.