Pepsico Violations of COBRA’s Notice Requirements Class Action

The Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) allows employees who are terminated by certain companies to continue their health insurance for a number of months after termination. The complaint for this class action claims that Pepsico, Inc. violated the law in not giving its employees proper information about COBRA. 

The class for this action is all participants and beneficiaries in Pepsico’s health plan to whom Pepsico sent a COBRA notice, during the applicable statute of limitations, as a result of a qualifying event, as determined by Pepsico, who did not elect COBRA.

COBRA was added to the Employee Retirement Income Security Act (ERISA), a law which governs retirement and health care plans for employers with more than twenty employees on a typical business day during the preceding year. Because health care is important and coverage is expensive, the law lays out requirements for how employers give their employees notice of COBRA and their ability to continue health care plans.

The complaint quotes the law as saying, “The notice required by this paragraph (b) shall be written in a manner calculated to be understood by the average plan participant” and must contain certain information. The Department of Labor has put out a Model COBRA Continuation Coverage Election Notice and says it “will consider use of the model election notice, appropriately completed, good faith compliance with the election notice content requirements of COBRA.”

However, the complaint claims that Pepsico does not use the Model Notice. It says that the notice provided by Pepsico is inferior and does not contain all the required information, much less put all the information in a single notice. 

Among the deficiencies in Pepsico’s notice(s), the complaint cites the following:

  • It does not explain how to enroll in COBRA. It simply provides a general phone number for a third-party administrator that employees can call with any benefit-related questions. In contrast, the Model Notice contains an election form that can be used to enroll as well as the due date for the election. 
  • It does not give the address to which payments should be sent. 
  • It does not inform terminated employees that delayed payment or nonpayment can cause them to lose coverage. It also does not say what happens if someone becomes covered under another group plan or becomes eligible for Medicare.
  • It does not include enough explanatory information.
  • It does not identify the plan administrator for the COBRA coverage or provide a telephone number or other information on the administrator.
  • It is not written in a way “calculated to be understood by the average plan participant.”
Article Type: Lawsuit
Topic: Employment
No case events.
Tags: ERISA Violations, Employment Violations, Improper COBRA Notice